[Federal Register Volume 78, Number 226 (Friday, November 22, 2013)]
[Rules and Regulations]
[Pages 70163-70188]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-28078]
[[Page 70163]]
Vol. 78
Friday,
No. 226
November 22, 2013
Part III
Department of Energy
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Federal Energy Regulatory Commission
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18 CFR Parts 38 and 284
Communication of Operational Information Between Natural Gas Pipelines
and Electric Transmission Operators; Final Rule
Federal Register / Vol. 78 , No. 226 / Friday, November 22, 2013 /
Rules and Regulations
[[Page 70164]]
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DEPARTMENT OF ENERGY
Federal Energy Regulatory Commission
18 CFR Parts 38 and 284
[Docket No. RM13-17-000; Order No. 787]
Communication of Operational Information between Natural Gas
Pipelines and Electric Transmission Operators
AGENCY: Federal Energy Regulatory Commission.
ACTION: Final rule.
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SUMMARY: In this Final Rule, the Federal Energy Regulatory Commission
(Commission) amends the Commission's regulations to provide explicit
authority to interstate natural gas pipelines and public utilities that
own, operate, or control facilities used for the transmission of
electric energy in interstate commerce to share non-public, operational
information with each other for the purpose of promoting reliable
service or operational planning on either the public utility's or
pipeline's system. The revised regulations will help maintain the
reliability of pipeline and public utility transmission service by
permitting transmission operators to share information with each other
that they deem necessary to promote the reliability and integrity of
their systems. The Final Rule adopts the regulations proposed in the
Notice of Proposed Rulemaking without modification.
DATES: This rule is effective December 23, 2013. The incorporation by
reference of certain publications in this rule is approved by the
Director of the Federal Register as of December 23, 2013.
FOR FURTHER INFORMATION CONTACT:
Caroline Daly (Technical Information),
Office of Energy, Policy & Innovation,
888 First Street NE.,
Washington, DC 20426,
(202) 502-8931,
[email protected].
Anna Fernandez (Legal Information),
Office of the General Counsel,
888 First Street NE.,
Washington, DC 20426,
(202) 502-6682,
[email protected].
SUPPLEMENTARY INFORMATION:
Order No. 787
Table of Contents
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Paragraph
Numbers
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I. Introduction............................................ 2.
A. Background.......................................... 2.
B. NOPR................................................ 5.
II. Discussion............................................. 7.
A. Need For the Rule................................... 18.
1. NOPR............................................ 18.
2. Comments........................................ 20.
3. Commission Determination........................ 27.
B. Scope of Information................................ 33.
1. NOPR............................................ 33.
2. Comments........................................ 35.
3. Commission Determination........................ 41.
C. Entities Covered Under the Rule..................... 46.
1. NOPR............................................ 46.
2. Comments........................................ 49.
3. Commission Determination........................ 56.
D. The No-Conduit Rule and Competitive Concerns........ 60.
1. NOPR............................................ 60.
2. Adequacy of No-Conduit Rule to Protect against 65.
Competitive Harm..................................
3. Exceptions to the No-Conduit Rule............... 90.
III. Questions Posed by the Commission..................... 100.
A. Generator to Electric Transmission Operator 100.
Communications........................................
1. NOPR............................................ 100.
2. Comments........................................ 101.
3. Commission Determination........................ 105.
B. Three-Way Communication of Non-Public Operational 106.
Information...........................................
1. NOPR............................................ 106.
2. Comments........................................ 107.
3. Commission Determination........................ 115.
C. Examples of Non-Public Operational Information...... 117.
1. NOPR............................................ 117.
2. Comments........................................ 119.
3. Commission Determination........................ 123.
IV. Clarification Regarding Table-Top Exercises............ 126.
A. NOPR................................................ 126.
B. Comments............................................ 127.
C. Commission Determination............................ 128.
V. Miscellaneous........................................... 131.
A. Monitoring, Existing Tariff Requirements, Document 131.
Destruction...........................................
1. Comments........................................ 131.
2. Commission Determination........................ 134.
B. Costs of Information Sharing........................ 137.
1. Comments........................................ 137.
2. Commission Determination........................ 138.
C. Implementation...................................... 139.
1. Comments........................................ 139.
2. Commission Determination........................ 143.
VI. Information Collection Statement....................... 145.
VII. Environmental Analysis................................ 152.
[[Page 70165]]
VIII. Regulatory Flexibility Act........................... 153.
IX. Document Availability.................................. 155.
X. Effective Date and Congressional Notification........... 158.
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Order No. 787
Final Rule
(Issued November 15, 2013)
1. In this Final Rule, the Federal Energy Regulatory Commission
revises Parts 38 and 284 of the Commission's regulations to provide
explicit authority to interstate natural gas pipelines and public
utilities that own, operate, or control facilities used for the
transmission of electric energy in interstate commerce to share non-
public, operational information with each other for the purpose of
promoting reliable service or operational planning on either the public
utility's or pipeline's system.\1\ The revised regulations will help
maintain the reliability of pipeline and public utility transmission
service by permitting transmission operators to share information with
each other that they deem necessary to promote the reliability and
integrity of their systems. The Final Rule adopts the regulations
proposed in the Notice of Proposed Rulemaking without modification.\2\
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\1\ In this Final Rule, the Commission refers to interstate
natural gas pipelines and public utilities that own, operate, or
control facilities used for the transmission of electric energy in
interstate commerce collectively as ``transmission operators.''
\2\ Communication of Operational Information Between Natural Gas
Pipelines and Electric Transmission Operators, 78 FR 44900 (July 25,
2013), FERC Stats. & Regs ] 32,699 (2013) (cross-referenced at 144
FERC ] 61,043 (2013) (NOPR)).
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I. Introduction
A. Background
2. In recent years, reliance on natural gas as a fuel for electric
generation has steadily increased.\3\ This trend is expected to
continue into the future, resulting in greater interdependence between
the natural gas and electric industries.\4\ Several events over the
last few years, such as the Southwest Cold Weather Event,\5\
demonstrate the crucial interaction between natural gas pipelines and
electric transmission systems and the need for robust communication
between these industry sectors to ensure that both systems operate
safely and effectively for the benefit of their customers.
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\3\ See, e.g., Energy Information Administration, Fuel
Competition in Power Generation and Elasticities of Substitution
(June 2012); Richard Smead, All Industry Segments Working for
Success in Growing Gas-Fired Generation (Nov. 15, 2012); ISO-NE.,
Addressing Gas Dependence at 3 (July 2012) (reliance on natural gas-
fired electricity in the region increased from five percent in 1990
to 51 percent in 2011).
\4\ See, e.g., North American Electric Reliability Corporation,
2013 Special Reliability Assessment: Accommodating an Increased
Dependence on Natural Gas for Electric Power; Phase II: A
Vulnerability and Scenario Assessment for the North American Bulk
Power System at 1 (May 2013) (``Over the past decade, natural gas-
fired generation rose significantly from 17 percent to 25 percent of
U.S. power generation and is now the largest fuel source for
generation capacity. Gas use is expected to continue to increase in
the future, both in absolute terms and as a share of total power
generation and capacity.''), available at http://www.nerc.com/pa/RAPA/ra/Reliability%20Assessments%20DL/NERC_PhaseII_FINAL.pdf;
Energy Information Administration, Annual Energy Outlook 2013 Early
Release Overview (2013) (showing electric generation from natural
gas rising from 13 percent in 1993 to 30 percent in 2040), available
at http://www.eia.gov/forecasts/aeo/er/early_elecgen.cfm; The New
England State Committee on Electricity, Natural Gas Infrastructure
and Electric Generation: A Review of Issues Facing New England (Dec.
14, 2012), available at http://www.nescoe.com/uploads/Phase_I_Report_12-17-2012_Final.pdf.
\5\ See FERC/NERC, Report on Outages and Curtailments During the
Southwest Cold Weather Event of February 1-5, 2011 (2011), available
at http://www.ferc.gov/legal/staff-reports/08-16-11-report.pdf.
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3. Since February 2012, the Commission has requested comment and
conducted multiple technical conferences on various aspects of gas-
electric interdependence and coordination in order to better understand
the interface between the electric and natural gas pipeline industries
and identify areas for improved coordination.\6\ In this proceeding,
the Commission addresses one aspect of gas-electric interdependence and
coordination: communication and information-sharing between the natural
gas and electric industries.
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\6\ The NOPR contains a detailed description of the Commission's
various actions on gas-electric coordination and will not be
repeated here.
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4. On December 7, 2012, the Commission issued a Notice of Request
for Comments and Technical Conference regarding information sharing and
communication issues between the natural gas and electricity
industries.\7\ In response, natural gas and electric industry
participants described a variety of actions that are currently being
taken to improve communications and information sharing between the two
industries. While several entities acknowledged that system reliability
and contingency planning could be further enhanced by the sharing of
non-public, operational information directly between transmission
operators, several transmission operators pointed out that there is
general reluctance to share such information because of concerns that
doing so could be a violation of current laws, regulations or tariffs,
including the Commission's prohibition on undue discrimination.
Accordingly, multiple industry participants requested that, in order to
facilitate the exchange of information between transmission operators,
the Commission should more clearly identify the types of operational
information that may be shared between transmission operators and
clarify that the sharing of such information does not violate the
prohibition against undue discrimination. While electric generators
generally did not oppose the sharing of such information, they,
together with other entities, expressed concern about the communication
of generator-specific information between an electric transmission
operator and an interstate natural gas pipeline operator without the
generator's knowledge. Some entities also expressed concern regarding
the potential harm to industry participants from the improper use of
commercially sensitive information.\8\
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\7\ Coordination between Natural Gas and Electricity Markets,
Docket No. AD12-12-000 (Dec. 7, 2012) (Notice of Request for
Comments and Technical Conference) (http://www.ferc.gov/EventCalendar/Files/20121207134434-AD12-12-000TC1.pdf ); 77 FR 74180
(Dec. 13, 2012) (http://www.gpo.gov/fdsys/pkg/FR-2012-12-13/pdf/2012-30063.pdf ).
\8\ A summary of these views was presented in the NOPR, and will
not be repeated in detail here. See NOPR, FERC Stats. & Regs. ]
32,699 at PP 7-9 (cross-referenced at 144 FERC ] 61,043).
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B. NOPR
5. On July 18, 2013, the Commission issued the NOPR, in which it
proposed to revise Parts 38 and 284 of its regulations to provide
explicit authority to interstate natural gas pipelines and public
utilities that own, operate, or control facilities used for the
transmission of electric energy in interstate commerce to share non-
public, operational information with each other for the purpose of
promoting reliable service or operational planning on either the public
utility's or pipeline's system. As a protection against the disclosure
of non-public,
[[Page 70166]]
operational information, the Commission also proposed a No-Conduit Rule
that prohibits subsequent disclosure of that information to a marketing
function employee or to a third party.
6. Comments on the NOPR were due on August 26, 2013. Thirty-three
parties filed comments. NGSA filed reply comments on September 30,
2013. Comments were received from Regional Transmission Organizations
and Independent System Operators (RTOs/ISOs), electric utilities,
interstate natural gas pipelines, LDCs, state regulators, generators,
and other parties. Of these, 30 supported or did not oppose the NOPR
\9\ and three opposed it.\10\ In general, most commenters support the
proposed rule to help promote the reliability and efficiency of the
natural gas and electric systems by eliminating legal uncertainty
regarding the ability of interstate natural gas pipelines and electric
transmission operators to exchange non-public, operational information.
Some commenters request that the Commission modify or clarify the
proposal in a number of respects.
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\9\ American Electric Power Service Corporation (AEP), American
Gas Association (AGA), American Public Power Association (APPA),
Boardwalk Pipeline Partners, LP (Boardwalk Pipelines), California
Independent Operator (CAISO), Duke Energy Corporation (Duke), Edison
Electric Institute (EEI), Electric Power Supply Association (EPSA),
Electricity Consumers Resource Council (ELCON), Enable Interstate
Pipelines (Enable), International Transmission Company (ITC),
Interstate Natural Gas Association of America (INGAA), ISO New
England Inc. (ISO-NE), ISO/RTO Council (IRC), Massachusetts
Municipal Wholesale Electric Company (MMWEC), Midcontinent
Independent System Operator (MISO), National Rural Electric
Cooperative Association (NRECA), Natural Gas Supply Association
(NGSA), New England Natural Gas Industry (NE Gas Industry), New
England Power Generators Association Inc. (NEPGA), New England
States Committee on Electricity (NESCOE), New York ISO (NYISO), New
York Public Service Commission (NYPSC), New York Transmission Owners
(NYTOs), North American Electric Reliability Corporation (NERC),
Pacific Gas and Electric Company (PG&E), Process Gas Consumers
(PGC), Public Utilities Commission of Ohio (PUCO), Tennessee Valley
Authority (TVA), Washington Gas Light Company (Washington Gas).
\10\ American Public Gas Association (APGA), Consumers Energy
Company (Consumers Energy), and New Jersey Board of Public Utilities
(NJBPU).
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II. Discussion
7. In this Final Rule, the Commission is adopting the NOPR as
proposed. The Commission is modifying Parts 38 and 284 of the
Commission's regulations to provide explicit authority to interstate
natural gas pipelines and public utilities that own, operate, or
control facilities used for the transmission of electric energy in
interstate commerce to share non-public, operational information with
each other for the purpose of promoting reliable service or operational
planning on either the pipeline's or public utility's system. The
Commission also is adopting a No-Conduit Rule to provide additional
protections against undue discrimination and ensure that the non-
public, operational information shared under the rule remains
confidential.
8. Communications between transmission operators serve a valuable
and necessary purpose to help ensure reliability on both systems. With
the increasing reliance on natural gas as a fuel for electric
generation, ensuring robust communications between the transmission
operators in the electric and natural gas industries is valuable to the
ability of both systems to operate reliably and effectively. Electric
transmission operators are continuously and near instantaneously
balancing supply and demand to ensure the system remains in
equilibrium.\11\ In contrast, due to the physical characteristics of
interstate natural gas pipelines, the pipelines require advance
nominations to ensure they have sufficient line pack and storage
available to meet scheduled daily load of all their customers,
including the gas-fired generators, which may constitute significant
load for a pipeline and which generally rely on a just-in-time natural
gas supply and pipeline delivery. While pipeline line pack and storage
provide some operational flexibility to pipelines to accommodate load
swings throughout the day, short term swings in demand by gas-fired
electric generators resulting from redispatch by electric transmission
operators may be difficult to manage, particularly during times of
coincident peak loads on interstate natural gas pipelines and electric
transmission systems, such as during unusual cold weather events when
end-use customers may rely on both natural gas and electricity.
Communication between interstate natural gas pipelines and electric
transmission operators can be invaluable to help ensure that electric
transmission operators maintain grid reliability and that interstate
natural gas pipelines can meet contractual and operational obligations
to all of their shippers.
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\11\ Electric transmission systems currently have limited
electric storage capabilities.
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9. Currently, interstate natural gas pipelines and electric
transmission operators share non-public information with other
transportation or transmission operators. For example, interstate
natural gas pipeline operators routinely exchange nomination and
scheduling information with other interstate natural gas pipeline
operators and with upstream and downstream entities to confirm
transportation nomination requests and to coordinate flows between the
parties.\12\ Transmitting electric utilities similarly coordinate the
sharing of non-public interchange schedule information on a routine
basis through mechanisms such as, for example, e-Tags.\13\ This
coordination helps ensure the safe and reliable transmission of
electric power across a region.
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\12\ The nomination process initiates the flow of gas with the
natural gas transportation service provider. The natural gas
transportation service provider then confirms the flow of natural
gas with the corresponding upstream and downstream entities. Once
the natural gas quantities are confirmed, the natural gas
transportation service provider sends the scheduled quantities
information to the shipper. See 18 CFR 284.12(a)(1)(1), NAESB
Nomination Standard 1.3.2 (establishing the standards governing
pipeline confirmations with upstream and downstream parties).
\13\ e-Tags are used by applicable Balancing Authorities,
Reliability Coordinators, Interchange Authorities, Transmission
Service Providers, Purchasing-Selling Entities, Generator-Providing
Entities, and Load-Serving Entities to coordinate interchange
schedules. See, e.g., NAESB Wholesale Electric Quadrant (WEQ)
Business Practice Standards (Coordinate Interchange) requirement
004-2 (``Until other means are adopted by NAESB, the primary method
of submitting the RFI [Request for Interchange] shall be an e-Tag
communicated to and managed by the Sink BA's [Balancing Authority]
registered e-Tag authority service using protocols compliant with
the Version 1.8.1 Electronic Tagging Functional Specification.'')
and applicability section (``The Coordinate Interchange Business
Practice Standards apply to BA [Balancing Authority], RC
[Reliability Coordinator], IA [Interchange Authority], Transmission
Service Provider, PSE [Purchasing-Selling Entity], GPE [Generator-
Providing Entity], Load-Serving Entity [LSE], and any TPSE [a PSE
whose transmission approval rights are cited].'') NAESB WEQ Business
Practice Standards (Version 003), published July 31, 2012.
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10. In Order No. 698, the Commission recognized the need for inter-
industry communications by adopting industry-developed standards
requiring the exchange of operational information between the natural
gas and electric industries.\14\ These standards require a generator
and its directly connected natural gas pipeline(s) to ``establish
procedures to communicate material changes in circumstances that may
impact hourly flow rates.'' \15\ In
[[Page 70167]]
addition, these standards ensure that interstate natural gas pipelines
have relevant planning information to assist in maintaining the
operational integrity and reliability of pipeline service, as well as
to provide gas-fired generator operators with information as to whether
hourly flow deviations can be honored. NAESB Wholesale Electric
Quadrant (WEQ) Standard 011-1.6, also incorporated in the Commission's
regulations,\16\ requires that ISOs, RTOs, and other independent system
operators establish written operational communication procedures with
an appropriate interstate natural gas pipeline to be implemented when
an extreme condition occurs.
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\14\ Standards for Business Practices for Interstate Natural Gas
Pipelines; Standards for Business Practices for Public Utilities,
Order No. 698, FERC Stats. & Regs. ] 31,251 (2007), order on
clarification and reh'g, Order No. 698-A, 121 FERC ] 61,264 (2007).
In Order No. 698, the Commission incorporated by reference NAESB WGQ
Standard 0.3.12 into its regulations and NAESB WEQ Standard 011.
\15\ NAESB WGQ Version 2.0 Business Practice Standard 0.3.12.
See also Standards for Business Practices for Interstate Natural Gas
Pipelines, Order No. 587-V, FERC Stats. & Regs. ] 31,332 (2012)
(cross-referenced at 140 FERC ] 61,036) (2012), (incorporating by
reference the Version 2.0 WGQ Business Practice Standards). See also
18 CFR 284.12(a) (2013).
\16\ 18 CFR Part 38 (2013).
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11. Sharing of operational information between interstate natural
gas pipelines and electric transmission operators is akin to the
sharing of operational information among interconnected parties. Both
interstate natural gas pipelines and electric transmission operators
could benefit from information regarding whether scheduled transactions
on the others' systems will be carried out because of the potential
effect on reliable service and operational planning. In many cases,
gas-fired generators do not take natural gas at a uniform flow rate
over a 24 hour period, and the electric transmission operator may find
it valuable to know whether the interstate natural gas pipeline will be
able to provide a non-uniform flow rate to meet the demands on the
electric system. By the same token, it may be valuable to an interstate
natural gas pipeline to know the demands that may be placed on its
transportation system by gas-fired generators and whether such demands
may cause a problem with its ability to deliver gas to other customers.
Similarly, a disruption on an electric transmission line may force the
electric transmission operator to shut down a gas-fired generator,
which could cause increased gas pressure on an interstate natural gas
pipeline forced to terminate gas deliveries to that generator.
12. Commenters participating in the Commission staff technical
conferences, as well as comments to this rulemaking, expressed concern
that, without further clarification of the ability of interstate
natural gas pipelines and electric transmission operators to exchange
information, necessary communications may not take place. Comments have
focused on the applicability of both the statutory prohibitions on
undue discrimination and the Standards of Conduct. Both interstate
natural gas pipelines and electric transmission operators have stated
that clarification of their ability to exchange non-public information
would assist them in efficiently and reliably planning the operations
of their respective systems and addressing emergencies. The Commission
provides the requested clarification in this Final Rule. Sharing of
information valuable to reliable operations between transmission
operations is not the type of preferential treatment the Federal Power
Act (FPA) and Natural Gas Act (NGA) are intended to restrict. We find,
as discussed below, that the FPA and NGA provisions regarding undue
discrimination or unjust and unreasonable acts and practices do not
prevent the exchange of information between operators of interstate
natural gas pipeline transportation systems and electric transmission
operators provided for in this Final Rule.
13. Both the FPA and the comparable provisions of the NGA prohibit
undue discrimination or preference.\17\ However, FPA section 205(b) and
NGA section 4(b) do not forbid preferences, advantages and prejudices
per se.\18\ Rather, FPA section 205(b) and NGA section 4(b) prohibit
``undue'' preferences, advantages and prejudices.\19\ A difference in
treatment is not unduly discriminatory when the difference is
justified.\20\ In interpreting FPA section 205(b) and NGA section 4(b),
the courts have held that transmission providers cannot treat similarly
situated customers differently \21\ and that the disparate treatment of
two customer classes does not in and of itself result in an undue
preference or advantage or in an unreasonable difference in service if
the customer classes are not similarly situated.\22\ Whether a
preference is ``undue'' depends on the specific facts of the behavior
and the circumstances to determine whether disparities exist and
whether those disparities are rationally justified.\23\
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\17\ 16 U.S.C. 824d(b) (2012); 15 U.S.C. 717c(b) (2012).
\18\ See, e.g., Cities of Bethany v. FERC, 727 F.2d 1131, 1139
(D.C. Cir.), cert. denied, 469 U.S. 917, 105 S.Ct. 293, 83 L.Ed.2d
229 (1984).
\19\ See, e.g., Boroughs of Chambersburg v. FERC, 580 F.2d 573,
577 (D.C. Cir. 1978).
\20\ See Metropolitan Edison Co. v. FERC, 595 F.2d 851, 857
(D.C. Cir. 1979). See also Transmission Agency of N. California v.
FERC, 628 F.3d 538, 549 (D.C. Cir. 2010) (citing Ark. Elec. Energy
Consumers v. FERC, 290 F.3d 362, 367 (D.C. Cir. 2002) and Elec.
Consumers Res. Council v. FERC, 747 F.2d 1511, 1515 (D.C. Cir.
1984)).
\21\ See Transmission Agency of N. California v. FERC, 628 F.3d
at 549 (citing Sacramento Mun. Util. Dist. v. FERC, 474 F.3d 797,
802 (D.C. Cir. 2007)).
\22\ See, e.g., Sw. Elec. Coop., Inc. v. FERC, 347 F.3d 975, 981
(D.C. Cir. 2003). See also Michigan Consolidated Gas Co. v. FPC, 203
F.2d 895, 901 (3d Cir. 1953) and Complex Consol. Edison Co. of New
York, Inc. v. FERC, 165 F.3d 992, 1012 (D.C. Cir. 1999).
\23\ See St. Michaels Utilities Comm'n v. Fed. Power Comm'n, 377
F.2d 912, 915 (4th Cir. 1967).
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14. We find that the sharing of non-public, operational information
between public utilities that own, operate, or control facilities used
for the transmission of electric energy in interstate commerce and
interstate natural gas pipelines for the purpose of promoting reliable
service or operational planning is reasonable and not unduly
discriminatory or preferential. Undue discrimination provisions apply
to ensure that similarly situated customers are not subject to
disparate rates or terms and conditions of service. As noted above,
transmission operators are not similarly situated to other customers
because they require access to non-public scheduling and other types of
information from a variety of sources to help them maintain the
reliability and integrity of the transportation and transmission
systems. In addition, interstate natural gas pipelines are generally
not wholesale customers of electric transmission operators. Likewise,
RTOs/ISOs are not shippers on pipelines. Thus, we find that it is
appropriate and necessary, with adequate safeguards, to expressly
permit the sharing of non-public, operational information between
transmission operators.\24\
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\24\ The Commission recognizes that some vertically-integrated
transmission operators may have marketing function employees or
affiliates, such as generators or local distribution companies that
handle gas transactions. The Commission addresses concerns infra
with respect to potential access and misuse of information shared
pursuant to this Final Rule in the subsection entitled Adequacy of
No-Conduit Rule to Protect against Competitive Harm.
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15. To protect against the potential for undue discrimination, the
Commission is relying on existing safeguards as well as the adoption of
a No-Conduit Rule. First, while non-public, operational information may
be useful for planning, transmission operators cannot deviate from the
terms of their tariffs, and cannot operate in an unduly discriminatory
manner.\25\ Transmission operators are also subject to the same
limitations on sharing information with their marketing function
employees as provided under the Standards of Conduct.\26\ The
Commission's Standards of Conduct were adopted with respect to one
aspect of potentially
[[Page 70168]]
undue discrimination which may occur through exchanges of information
between transmission providers and their marketing functions in certain
situations.
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\25\ See, e.g., ISO New England Inc., 142 FERC ] 61,058, at P 23
(2013) (available capacity must be dispatched ``consistent with the
pipeline's tariff'' and ``[t]he pipelines are required to allocate
available capacity on a not unduly discriminatory basis among the
various requestors of capacity.'').
\26\ 18 CFR 358.6 and 358.7 (2013).
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16. Second, the No-Conduit Rule included in the Final Rule will
serve as an additional safeguard to ensure that transmission operators
comply with the prohibitions against undue discrimination or preference
with respect to their marketing function employees and third parties.
The No-Conduit Rule prohibits recipients of non-public, operational
information pursuant to the Final Rule from subsequently disclosing
that information to a third party or a marketing function employee, as
that term is defined in section 358.3(d) of the Commission's
regulations. As discussed below, adoption of this No-Conduit Rule
addresses many of the concerns regarding the sharing of commercially
sensitive, customer-specific information among transmission
operators.\27\
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\27\ As discussed further below, this No-Conduit Rule applies
only to the information the interstate natural gas pipeline and
electric transmission operator exchange pursuant to this Final Rule.
It does not otherwise affect the ability of interstate natural gas
pipelines and local distribution companies (LDCs) to exchange
operational information regarding actual or potential pipeline or
distribution system operational conditions affecting the gas flow
between these physically interconnected parties. Nor does it affect
the ability of an electric transmission operator to share its own
information with an LDC, if otherwise permitted under its tariff.
This Final Rule also does not prohibit electric transmission
operators from sharing non-public, operational information received
from a pipeline pursuant to this rule with LDCs, if otherwise
provided for in tariff provisions approved by the Commission.
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17. Based on the potential need for the exchange of information to
promote the reliability and operational integrity of the transmission
and transportation systems the Commission regulates, and the
protections against undue discrimination, the Commission finds that the
exchange of non-public, operational information between transmission
operators does not violate the statutory prohibitions on undue
discrimination or preference as discussed herein. As discussed in more
detail infra, to the extent that an electric transmission operator or
interstate natural gas pipeline has a tariff provision which precludes
a communication that would otherwise be authorized under the Final
Rule, it will have to make a filing under section 205 of the FPA or
section 4 of the NGA to revise that tariff provision to allow the
exchanges of information permitted by this Final Rule. Below, the
Commission will address the comments received on the NOPR.
A. Need For the Rule
1. NOPR
18. In the NOPR, the Commission pointed out that, while several
entities acknowledged that system reliability and contingency planning
could be further enhanced by the sharing of non-public, operational
information directly between transmission operators, several
transmission operators pointed out that there is general reluctance to
share such information because of concerns that doing so could be a
violation of current laws, regulations or tariffs.\28\ Accordingly,
several entities, including interstate natural gas pipelines and
electric transmission operators, requested that, in order to facilitate
the exchange of information between transmission operators, the
Commission should more clearly identify the types of operational
information that may be shared between transmission operators and
clarify that the sharing of such information does not violate the
prohibition against undue discrimination.
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\28\ NOPR, FERC Stats. & Regs. ] 32,699 at P 7 (cross-referenced
at 144 FERC ] 61,043).
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19. In an effort to provide certainty to the industry and remove
barriers--real or perceived--to the sharing of non-public, operational
information, the Commission proposed to revise its regulations to
authorize expressly the exchange of non-public, operational information
between electric transmission operators and interstate natural gas
pipelines. In consideration of the concerns regarding the exchange of
non-public operational information, the Commission also proposed to
adopt a No-Conduit Rule which prohibits recipients of the non-public,
operational information from subsequently disclosing or being a conduit
for subsequently disclosing that information to third parties or
marketing function employees.
2. Comments
20. The large majority of commenters generally support or do not
oppose the NOPR. Many commenters generally agree that the rule is
needed to provide certainty to interstate natural gas pipelines and
electric transmission operators so that they may exchange information
needed to promote reliable service and operational planning. They also
generally support the proposed scope of information that may be shared
under the rule, as well as the limitations on disclosures of such
information via the No-Conduit Rule.
21. For example, NERC states that, based on its extensive study of
both industries and stakeholder discussions with electric and natural
gas operators, transmission operators could make better informed
operating decisions, particularly during seasonal peak electric system
conditions, if they have the ability to obtain information about
interstate natural gas pipeline flows and pipeline system
conditions.\29\ NESCOE states that the implementation of these
revisions in the near-term would provide regions like New England with
certainty and flexibility to put in place what has the strong potential
to be an effective and low cost reliability measure.\30\ INGAA states
that the proposed scope of information transmission operators may share
under the proposed regulations is appropriate and provides sufficient
flexibility and guidance.\31\
---------------------------------------------------------------------------
\29\ NERC Comments at 5-6.
\30\ NESCOE Comments at 7.
\31\ INGAA Comments at 2.
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22. Three commenters, APGA, Consumers Energy, and NJBPU, oppose the
Commission's proposed rulemaking.
23. As a general matter, APGA believes that the proposed
regulations in the NOPR open the door to the release of commercially
sensitive, non-public information without adequate support for such
action and without adequate guidelines for such release.\32\ First,
APGA contends that interstate natural gas pipelines have made clear
that they do not need additional information to operate reliably and
that they already make a significant amount of operational data
available to the public on a non-discriminatory basis.\33\ Second, APGA
contends that most electric transmission operators are not experiencing
reliability problems related to inadequate access to non-public, gas-
related information and that much of the operational data electric
transmission operators say they would like to have is already publicly
available.\34\ APGA contends that the other data electric transmission
operators say they would like to have, such as confidential gas
availability information indicating whether a specific generator can be
dispatched reliably, is information that the interstate natural gas
pipelines simply do not have. Third, APGA states that generators may be
harmed by secret communications between transmission operators
regarding whether a given generation facility may or may not have
adequate gas supplies to operate because interstate natural gas
pipelines do not have sufficient information to
[[Page 70169]]
answer that question accurately. APGA argues that, given that the
record fails to support a finding of a critical need for the exchange
of non-public information to foster reliability and due to the
importance of not permitting the sharing of confidential, non-public
data absent a showing that such sharing would be beneficial, the NOPR
should be abandoned.\35\
---------------------------------------------------------------------------
\32\ APGA Comments at 1.
\33\ Id. at 4.
\34\ Id. at 4-5.
\35\ Id. at 7.
---------------------------------------------------------------------------
24. Instead, APGA argues that the Commission should conduct a case-
by-case evaluation of what non-public information specific interstate
natural gas pipelines and electric transmission operators may release
and under what circumstances, rather than the sweeping rule proposed in
the NOPR.\36\ APGA also states that the real issue is the lack of
interstate natural gas pipeline capacity to meet peak demand from
electric generators resulting from electric generators' failure to
subscribe to adequate firm transportation service.\37\
---------------------------------------------------------------------------
\36\ Id. at 8 and 11.
\37\ Id. at 11 & n.28.
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25. Similar to APGA, NJBPU is concerned about the potential for
harm to industry participants, as well as the potential for improper
use of non-public, operational information.\38\ NJBPU does not believe
that the Commission's proposed No-Conduit Rule adequately responds to
the concerns of NJBPU and various others. NJBPU states that, while the
proposed No-Conduit Rule may address subsequent disclosure to an
affiliate or third party, it does not address the problem of abuse,
gaming, and market manipulation by an initial recipient of non-public,
operational information.
---------------------------------------------------------------------------
\38\ NJBPU Comments at 3.
---------------------------------------------------------------------------
26. Consumers Energy argues that the proposed rule would do little
to help ensure reliable service.\39\ Consumers Energy points out that
there has never been an attempt to incent discussion by or between coal
producers, rail or barge transporters under the guise of increasing
electric transmission reliability. Consumers Energy asserts that
transmission operators can and will address reliability through the use
of tariffs and contracts. Consumers Energy believes contractually
specified flow rates and nominations limitations have provided and can
continue to provide the information that is necessary to ensure a
continued high level of reliability of interstate natural gas pipelines
and that this will, in turn, ensure a continued high level of
reliability of the electric transmission grid.\40\ Consumers Energy
further contends that RTOs' resource adequacy-related tariff provisions
adequately inform them as to the availability of resources under their
dispatch. Lastly, Consumers Energy states that, rather than permitting
the communication of non-public, operational information between
transmission operators to ensure service reliability, the appropriate
solution to the problem of ensuring service reliability in the face of
increased reliance on natural gas as a fuel for electric generation is
to recognize the true cost of such reliability.\41\ This, Consumers
Energy contends, will serve to increase investment in the interstate
natural gas pipeline and LDC infrastructure that will be needed to
serve this expanding load.
---------------------------------------------------------------------------
\39\ Consumers Energy Comments at 3.
\40\ Id. at 4.
\41\ Id. at 5.
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3. Commission Determination
27. We conclude that we need to revise our existing regulations to
provide greater certainty to electric transmission operators and
interstate natural gas pipelines regarding the permissibility of
sharing non-public, operational information, including customer-
specific information, for the purpose of promoting reliable service or
operational planning. As discussed above, the record and the
operational realities of the two industries show that the exchange of
non-public, operational information would be valuable to foster
reliability. While interstate natural gas pipelines and electric
transmission operators publicly post a significant amount of important
information needed by interstate natural gas pipeline shippers and
electric transmission customers, interstate natural gas pipelines and
electric transmission operators need other operational information,
including non-public information, in order to reliably manage the
operations of these systems. Interstate natural gas pipelines already
provide non-public operational information to other interconnected
physical parties to ensure accurate scheduling of flows on their
systems. Electric transmission operators similarly communicate non-
public interchange scheduling information and other information among
themselves and with Balancing Authorities. Permitting interstate
natural gas pipelines and electric transmission operators to exchange
non-public, operational information with each other will help them
better plan for day-to-day operations as well as better manage their
respective system needs during potential coincident peaks that may
limit the flexibility of both systems.
28. Further, the adoption of a No-Conduit Rule, together with
existing safeguards, reasonably addresses the concerns around the
improper use of non-public, operational information.\42\
---------------------------------------------------------------------------
\42\ As discussed earlier, interstate natural gas pipelines and
electric transmission operators are not similarly situated to other
customers since they (1) are not typically customers of each other;
and (2) operate physical systems and require information about
physically interconnected and interdependent systems in order to
maintain efficient and reliable service to their customers.
---------------------------------------------------------------------------
29. We disagree with APGA's characterization that the proposed rule
lacks value. The majority of commenters expressly support the rule and
in many of their comments they affirm that the rule would promote
reliable service. We are persuaded by these comments that argue that
expressly permitting the sharing of non-public, operational information
will promote reliable service and operational planning. For example,
representatives and members of the interstate natural gas pipeline
industry, including INGAA and Boardwalk Pipelines, are among the many
commenters that expressly support the rule. Also, several entities,
including electric transmission operators, have specifically identified
non-public information that they would like to receive from or share
with interstate natural gas pipelines under the rule because they
believe it would promote reliable service or operational planning on
both systems. Such information includes real-time pipeline flow
information, generator service nominations and priority, and generator
outage information. Improved reliability and operational planning
amongst transmission operators will benefit both electric and natural
gas industries as well as ultimate consumers.
30. We do not agree with Consumers Energy and APGA that this rule
is unnecessary because the exchange of information can be achieved
solely through the use of tariffs and contracts or through a case-by-
case evaluation. As explained above, interstate natural gas pipelines
and electric transmission operators may need a variety of information
from each other depending on individual circumstances and may not be in
a position to anticipate in advance exactly what information needs to
be exchanged. Despite this need, these transmission operators have
expressed concerns that the Commission's current regulations and
uncertainty over their ability to share non-public, operational
information acts as an impediment to exchange of this information.
Adopting regulations that
[[Page 70170]]
eliminate transmission operator concerns about such exchanges will
provide the flexibility that they require.
31. APGA also suggests that the real issue is the lack of pipeline
capacity resulting from generators' failure to subscribe to adequate
firm transportation service. That does not diminish the need for
transmission operators to be able to exchange non-public, operational
information. No one disputes that the electric industry has become
increasingly dependent on gas-fired generation and coordination is
integral to promoting reliable service. Natural gas and electric
coordination has many facets including communications, scheduling, and
capacity release.\43\ In this Final Rule, the Commission is focused
solely on communications.
---------------------------------------------------------------------------
\43\ Coordination between Natural Gas and Electricity Markets,
Docket No. AD12-12-000 (July 5, 2012) (Notice of Technical
Conferences) (available at http://elibrary.ferc.gov/idmws/common/opennat.asp?fileID=13023450); 77 FR 41184 (July 12, 2012) (available
at http://www.gpo.gov/fdsys/pkg/FR-2012-07-12/pdf/2012-16997.pdf);
Coordination between Natural Gas and Electricity Markets, Docket No.
AD12-12-000 (Dec. 7, 2012) (Notice Of Request for Comments and
Technical Conference) (http://www.ferc.gov/EventCalendar/Files/20121207134434-AD12-12-000TC1.pdf); 77 FR 74180 (Dec. 13, 2012)
(http://www.gpo.gov/fdsys/pkg/FR-2012-12-13/pdf/2012-30063.pdf);
Coordination between Natural Gas and Electricity Markets, Docket No.
AD12-12-000 (Mar. 5, 2013) (Notice of Technical Conference).
---------------------------------------------------------------------------
32. The Commission also finds that existing safeguards, together
with the adoption of a No-Conduit Rule, reasonably address APGA's and
NJBPU's concerns regarding the improper use of non-public, operational
information, whether by an initial recipient of non-public, operational
information or in a subsequent disclosure. In addition, the
Commission's regulations expressly preclude the type of abuse, gaming,
and market manipulation that NJBPU warns against.\44\ As we have noted,
both interstate pipelines and electric transmission operators must
comply with their tariffs and applicable Commission regulations when
making capacity allocation and other operational determinations.\45\
Moreover, under the Standards of Conduct and the No-Conduit Rule
adopted in this proceeding, interstate natural gas pipelines and
electric transmission operators cannot share this information with
their marketing function employees.\46\ Nor can they provide this
information to third-parties. While any exchange of non-public
information may pose some disclosure risks, we find that, on balance,
the regulations adopted here, including the No-Conduit Rule,
appropriately balance the significant benefits to be gained by robust
information exchange among interdependent transmission operators
against the potential risks from disclosure of non-public information.
---------------------------------------------------------------------------
\44\ The Commission would have jurisdiction to pursue violations
of the Commission's Anti-Manipulation Rule, 18 CFR 1c (2013) if an
entity (including a non-jurisdictional entity) uses a fraudulent
scheme or makes a material misrepresentation that would operate as a
fraud or deceit upon any entity or market; has the requisite
scienter; and in connection with a transaction subject to the
Commission's jurisdiction.
\45\ See ISO New England Inc., 142 FERC ] 61,058, at P 23 (2013)
(available capacity must be dispatched ``consistent with the
pipeline's tariff'' and ``[t]he pipelines are required to allocate
available capacity on a not unduly discriminatory basis among the
various requestors of capacity.'')
\46\ See 18 CFR 358.6 and 358.7 (2013).
---------------------------------------------------------------------------
B. Scope of Information
1. NOPR
33. In the NOPR, the Commission proposed to authorize public
utilities providing transmission service and interstate natural gas
pipelines to share non-public, operational information when such
information is for the purpose of promoting reliable service or
operational planning. The Commission stated that the term ``non-public,
operational information'' is information that is not publicly posted,
yet helps transmission operators to operate and maintain either a
reliable pipeline system or a reliable electric transmission system on
a day-to-day basis, as well as during emergency conditions or for
operational planning. The NOPR stated that non-public, operational
information may also include generator, pipeline, or transmission-
specific information. In using the term ``non-public, operational
information,'' the Commission intends that transmission operators would
be permitted to share information dealing with actual, anticipated, or
potential effects on the ability to provide electric and gas service
based on the respective operator's experience and understanding of the
operational capability and customer demands on their respective
systems.
34. The NOPR sought comment on the scope of the non-public,
operational information that transmission operators may share under the
proposed regulations.\47\ The Commission stated that the proposed
regulations were structured to provide significant flexibility to
individual transmission operators--who have the most insight and
knowledge of their systems--to determine what non-public operational
information, if any, would promote reliable service on their systems,
without fear of violating the Commission's prohibitions on undue
discrimination and undue preference or such an exchange being
considered an unjust or unreasonable practice.\48\ In proposing the
regulations, the Commission stated its intent to remove barriers to the
sharing of non-public, operational information, not just during
emergencies, but also for day-to-day operations, planned outages, and
scheduled maintenance.\49\
---------------------------------------------------------------------------
\47\ NOPR, FERC Stats. & Regs. ] 32,699 at P 24 (cross-
referenced at 144 FERC ] 61,043).
\48\ Id. P 11.
\49\ Id. P 10.
---------------------------------------------------------------------------
2. Comments
35. Several commenters express support for allowing transmission
operators to determine the specific non-public, operational information
to share, as opposed to the Commission providing a prescriptive,
exhaustive list of information that may be shared.\50\ In supporting
the NOPR's proposed scope, these commenters state that the proposed
rule would permit flexible communications that are appropriately suited
to the differences in information needs of each region. For example,
NEPGA states that the NOPR provides for an appropriate amount of
deference by defining the categories and scope of information that may
be shared without narrowly defining each type of information.\51\
---------------------------------------------------------------------------
\50\ MMWEC Comments at 4; NEPGA Comments at 3; PG&E Comments at
4 and 5; TVA Comments at 2; NYTOs Comments at 7; MISO Comments at 3;
INGAA Comments at 2 and 4; Enable Comments at 1; APPA Comments at 5;
PUCO Comments at 6; NRECA Comments at 7; CAISO Comments at 3; and
EEI Comments at 4 and 5.
\51\ NEPGA Comments at 3.
---------------------------------------------------------------------------
36. AGA agrees with the Commission that the proposed communications
are important not only during emergencies or critical situations, but
also when conditions, or emerging conditions, could lead to events on
either system that have the potential to threaten the integrity or
reliability of one or both of the systems.\52\ NERC contends that the
exchange and availability of real-time, day-ahead, and season-ahead gas
flow information and data to transmission system operators will best
address electric vulnerabilities related to natural gas fuel
disruptions.\53\
---------------------------------------------------------------------------
\52\ AGA Comments at 5.
\53\ NERC Comments at 6.
---------------------------------------------------------------------------
37. Beyond supporting the approach proposed in this rulemaking,
some commenters warned of the dangers of trying to develop an
exhaustive list of the permitted communications. For example, MMWEC
expressed concern about the chilling effect on system operators that
would result if the Commission issued a specific list of information
permitted to be shared.
[[Page 70171]]
MMWEC states that under such a proscriptive approach, operators would
be wary of violating Commission rules by sharing information not
specifically identified.\54\ MMWEC further argues that it is better to
encourage a broad range of information sharing rather than a
restrictive approach considering the critical situation in New
England.\55\ PG&E notes that the use of a specific list of information
may also impede communications should such a list exclude a key type of
information.\56\
---------------------------------------------------------------------------
\54\ MMWEC Comments at 4.
\55\ Id.
\56\ PG&E Comments at 5.
---------------------------------------------------------------------------
38. A few commenters, however, oppose the generality of the
proposed scope of communications permitted in the NOPR and request
greater specificity of the non-public, operational information that may
be shared between transmission operators.\57\ For example, NGSA
contends that the lack of specific parameters on what information
sharing is acceptable creates further uncertainty and concern for
market participants.\58\ NGSA argues that the scope of the NOPR, which
allows the sharing of any information for the purpose of promoting
reliable service and operational planning, is overly broad and could
allow operators to share commercially sensitive information.\59\ NGSA
proposes that the Commission limit interstate natural gas pipeline and
electric transmission operators' ability to share non-public
information by setting parameters for what information is acceptable
for operators to share.\60\ NGSA contends that providing parameters for
what information can be shared would reduce confusion and give industry
greater confidence that commercially sensitive information was not
being disclosed without companies' knowledge. NJBPU states that the
Commission should provide clear and explicit limits as to what
information should be kept confidential and what information may be
disclosed.\61\
---------------------------------------------------------------------------
\57\ AEP Comments at 4; NGSA Comments at 6-9; and NJBPU Comments
at 3.
\58\ NGSA Comments at 6.
\59\ Id. at 7.
\60\ Id. at 8.
\61\ NJBPU Comments at 3.
---------------------------------------------------------------------------
39. Consumers Energy is concerned that because the proposed rule
does not provide a specific list of non-public, operational information
that can be shared, the proposal raises the potential for compliance
issues related to interpreting what information may and may not
permissibly be shared.\62\ Consumers Energy is also concerned with the
potential consequences for unknowingly receiving information that could
not permissibly be shared and the consequences of taking action, or
failing to act, based on the receipt of such information.
---------------------------------------------------------------------------
\62\ Consumers Energy Comments at 5.
---------------------------------------------------------------------------
40. In addition, some commenters believe that the sharing of non-
public, operational information should be limited to emergencies. In
particular, ELCON urges the Commission to emphasize that the central
purpose of information sharing between interstate natural gas pipelines
and electric transmission operators is to address system reliability
and information sharing and, therefore, should focus on unusual non-
routine circumstances and not on normal day-to-day operations.\63\
ELCON states that outages, potential delivery restrictions, or
curtailments that could occur during extreme weather events are
examples of such unusual circumstances that would warrant the
information sharing between operators. NE Gas Industry states that the
proposed communications are critical in emergency situations of
imminent reliability concerns when the communications can have the most
immediate and positive impact, but should not be relied upon by the
RTOs/ISOs on a day-to-day basis in ensuring the reliability of the
natural gas-fired generators in their service territories.\64\
---------------------------------------------------------------------------
\63\ ELCON Comments at 2.
\64\ NE Gas Industry Comments at 8.
---------------------------------------------------------------------------
3. Commission Determination
41. The Commission adopts the NOPR proposal to provide explicit
authority to transmission operators to share non-public, operational
information with each other for the purpose of promoting reliable
service or operational planning on either the public utility or
interstate natural gas pipeline's system. In adopting the NOPR
proposal, the Commission is intentionally permitting the communication
of a broad range of non-public, operational information to provide
flexibility to individual transmission operators, who have the most
insight and knowledge of their systems, to share that information which
they deem necessary to promote reliable service on their system. The
Commission is not persuaded by the requests of NGSA, AEP, and NJBPU
that the Commission specify the communications that transmission
operators may share under the rule. As described above, the exchange of
non-public, operational information between transmission operators
would be to promote the reliability and operational integrity of both
the electric transmission and pipeline systems. Given the wide variety
of non-public operational information that may be needed for this
purpose both now and in the future, it is not practicable to develop a
specific and exhaustive list defining the permissible
communications.\65\ The Commission finds that the inclusion of such a
list in the regulations would unreasonably limit the flexibility of
transmission operators to determine what information they need based
upon the individual circumstances of their systems.
---------------------------------------------------------------------------
\65\ Below in section III.C we address comments regarding the
examples of non-public operational information included in the NOPR.
---------------------------------------------------------------------------
42. In addition, the Commission recognizes that the informational
needs of system operators vary by region and, therefore, a specific and
exhaustive list of permissive communications that may be relevant in
one region may not address the communications and operational needs of
transmission operators in another region. The Commission also
recognizes that the informational needs of transmission operators may
evolve over time as the generation mix in regions change and as
transmission operators develop further insight into, and gain
additional experience with, gas and electric coordination issues. In
response to Consumers Energy's concern about what information may
permissibly be shared, to the extent that a transmission operator is
uncertain as to what information may and may not permissibly be shared,
the Commission's compliance help desk is available to industry for
informal guidance.\66\
---------------------------------------------------------------------------
\66\ The Compliance Help Desk is available for persons seeking
technical assistance involving compliance with the statutes, rules,
regulations, and tariffs administered by the Commission. See http://www.ferc.gov/contact-us/compliance-help-desk/compliance-help-desk.asp.
---------------------------------------------------------------------------
43. The Commission reaffirms its intention, as stated in the NOPR,
to remove barriers to the sharing of non-public, operational
information between transmission operators not just during emergencies,
but also for day-to-day operations, planned outages, and scheduled
maintenance. The communication of non-public, operational information
permitted under this Final Rule will be applicable in all operational
situations, that is, during both emergency and non-emergency
situations. While communications permitted under the rule will be
especially valuable in emergency situations, transmission operators
should feel confident in their ability to engage in robust
communications with each other, subject to the No-Conduit Rule,
[[Page 70172]]
whenever necessary to promote reliable service, including on a day-to-
day basis.
44. The Commission disagrees with ELCON that information sharing
permitted under the rule should focus on unusual, non-routine
circumstances such as outages during extreme weather events. The
Commission's intent in providing explicit authority to transmission
operators to share non-public, operational information with each other
is to provide certainty. In part, the rule is designed to permit
exchanges of information that may limit or prevent extreme weather
events from having the impacts about which ELCON is concerned. It could
create further confusion or complexity to require transmission
operators to decipher whether system conditions have risen to the level
of unusual or non-routine before they engage in communications that
promote reliable service or operational planning. Therefore, the
Commission declines to limit communications or to create a new
definition of what constitutes an emergency for the purpose of
expressly authorizing communications under this rule.
45. In order to maintain reliability, it will be important for
transmission operators to coordinate planned outages and scheduled
maintenance on both natural gas and electric systems so that any
potential challenges may be identified more quickly, thus allowing more
time to develop reliable solutions. The Commission is encouraged by the
ongoing efforts regions are undertaking to improve coordination of
scheduled maintenance and planned outages, and is hopeful that this
Final Rule will allow for greater collaboration between the industries.
The Commission re-emphasizes that communications for both electric
transmission operators and interstate natural gas pipelines are
voluntary, and encourages regions to develop the communications
processes or protocols appropriately tailored to the needs of
transmission operators in each individual region.
C. Entities Covered Under the Rule
1. NOPR
46. In the NOPR, the Commission proposed to provide explicit
authority to interstate natural gas pipelines and public utilities that
own, operate, or control facilities used for the transmission of
electric energy in interstate commerce to share non-public, operational
information with each other for the purpose of promoting reliable
service or operational planning on either the public utility's or
pipeline's system.
47. The NOPR recognized the existing exchanges of information among
pipelines and among electric transmission operators that promote
reliable service or operational planning. It also noted that, while the
Commission regulates interstate service provided by intrastate
pipelines, Hinshaw pipelines, and LDCs, the companies themselves are
subject to state regulation and may exchange information subject to any
state regulations that govern their operations.
48. It was also noted in the NOPR that communications between
transmission operators and generators are not covered by the proposed
rule, but that transmission operators may always discuss generator-
specific information with the relevant generator.
2. Comments
49. AGA and Duke urge the Commission to clarify that public
utilities and interstate natural gas pipelines may share non-public,
operational information with intrastate pipelines and LDCs for the
purpose of promoting reliable service or operational planning.\67\ In
its reply comments, NGSA states that, to the extent that LDCs,
intrastate pipelines, gatherers and generators are allowed to
communicate with interstate natural gas pipelines and electric
transmission operators, the Commission should require that the No-
Conduit Rule be extended to them as a measure of protection for any
non-public information that may have been inadvertently conveyed.
Applying the No-Conduit Rule to all entities that are allowed to
communicate under the proposed rule, NGSA asserts, could help protect
commercially sensitive information.\68\
---------------------------------------------------------------------------
\67\ AGA Comments at 5-6, 8; Duke Comments at 3.
\68\ NGSA Reply Comments at 4-5.
---------------------------------------------------------------------------
50. The NYTOs urge the Commission to make clear in the Final Rule
that transmission operators may share non-public, operational
information with LDCs on a confidential basis.\69\ While the NYISO is
aware that state regulations govern the operations of intrastate
pipelines, Hinshaw pipelines, and LDCs,\70\ the NYISO states that
receiving information from intrastate and LDC pipelines would be
helpful and urges the Commission to encourage the same shared
communication between these entities and transmission operators.\71\
The NYTOs state that, like transmission operators, LDCs are not
similarly situated to other customers because they require access to
non-public information from a variety of sources to assist in ensuring
the reliability and integrity of their systems.\72\ Further, the NYTOs
state that LDCs are not generally customers of electric system
operators and RTOs/ISOs are not customers of LDCs. The NYTOs state
that, while LDCs are shippers on interstate natural gas pipelines, for
the purposes of maintaining reliability and operational planning, LDCs'
actions are more akin to a system operator than a gas customer--
especially when evaluating fuel security risks for gas-fired generation
located behind their city-gates.
---------------------------------------------------------------------------
\69\ NYTOs Comments at 6.
\70\ NYISO Comments at 3.
\71\ Id. at 2-3. NYISO asserts that the majority of New York
Control Area gas-fired generators are located behind an LDC, as
opposed to directly connected to the interstate pipelines.
\72\ NYTOs Comments at 6.
---------------------------------------------------------------------------
51. AGA asserts that LDC employees directly responsible for
operating the local gas system need access to such non-public,
operational information to assist in ensuring the integrity of their
system. Moreover, AGA believes that such communications are not
currently prohibited under the NGA or the Commission's Standards of
Conduct.\73\
---------------------------------------------------------------------------
\73\ AGA Comments at 6.
---------------------------------------------------------------------------
52. Further, AGA states that the Commission's proposed revisions
are unclear with respect to LDCs.\74\ AGA states that proposed sections
38.2 and 284.12 refer to pipelines covered by section 284.12(b)(4) of
the Commission's regulations as entities authorized to receive non-
public, operational information for the purposes of promoting reliable
service or operational planning. AGA states that it is unclear whether
the term ``pipelines'' in that context is limited to interstate natural
gas companies subject to the Commission's jurisdiction under section
1(b) of the NGA or includes any pipeline providing service under the
Commission's Part 284 regulations implementing the Natural Gas Policy
Act of 1978. AGA states that, if the former, LDCs would not be
considered pipelines authorized to receive non-public, operational
information and, if the latter, an LDC would only be considered a
pipeline authorized to receive non-public, operational information to
the extent the LDC provides interstate transportation or storage
service under Part 284, Subpart C or G. AGA states that LDCs in their
traditional role as bundled retail sales or gas service providers would
not be considered ``pipelines'' under the Commission's proposal.\75\
AGA,
[[Page 70173]]
therefore, recommends that the Commission clarify that public utilities
and interstate natural gas pipelines may share non-public, operational
information with LDCs for the purpose of promoting reliable service or
operational planning.\76\
---------------------------------------------------------------------------
\74\ Id. at 7.
\75\ Id. at 7-8.
\76\ Id. at 8.
---------------------------------------------------------------------------
53. As a separate issue, AGA is also concerned that ``the
interpretation that `pipelines' under proposed sections 38.2 and
284.12(b)(4) would include an intrastate or Hinshaw pipeline providing
interstate transportation or storage service under Part 284, Subpart C
or G, may impose new obligations on LDCs contrary to the Commission's
permissive approach in this proceeding.'' \77\ AGA states that,
currently, the Commission's Standards of Conduct apply to interstate
natural gas pipelines and impose no regulatory obligations directly on
LDCs. AGA further states that, if an intrastate or Hinshaw pipeline
were to be considered a ``pipeline'' subject to revised section
284.12(b)(4), questions arise regarding whether and how it must comply
with the proposed No-Conduit Rules, which prohibit disclosure to
marketing function employees as defined in section 358.3(d). In light
of the potential ambiguity, AGA urges the Commission to ``reiterate its
intent not to impose new regulatory obligations in this proceeding and
clarify that an intrastate or Hinshaw pipeline providing interstate
service under Part 284 of the Commission's regulations is not a
`pipeline' for purposes of proposed section 284.12(b)(4).'' \78\
---------------------------------------------------------------------------
\77\ Id.
\78\ Id.
---------------------------------------------------------------------------
54. EEI and Duke Energy request confirmation that otherwise
permissible communications will not be impacted by the NOPR.\79\
Specifically, EEI requests that the Final Rule include regulatory text
that expressly states that its scope does not and is not intended to
prohibit otherwise permissible communication between market
participants.\80\ EEI states that this would include, for example,
communications between: public utilities and their customers;
interstate natural gas pipelines and their customers; interstate
natural gas pipelines and LDCs; and LDCs and generators, as there are
many generation units that are served by LDCs behind the city gate.
---------------------------------------------------------------------------
\79\ Duke Comments at 2; EEI Comments at 3.
\80\ EEI Comments at 3-4.
---------------------------------------------------------------------------
55. Similarly, Duke Energy requests that the Commission clarify
that communication between interstate natural gas pipelines and LDCs,
and LDCs and generators (served behind the city gate), as well as
communications among the pipelines, transmission operators, generators
being served by the interstate natural gas pipeline and transmission
operator, and other non-marketing employees of the transmission
operator, are not prohibited, provided that the Standards of Conduct
No-Conduit Rule is followed and non-public transmission or customer
information is not shared with marketing function employees.\81\
---------------------------------------------------------------------------
\81\ Duke Comments at 2.
---------------------------------------------------------------------------
3. Commission Determination
56. In this Final Rule, the Commission adopts proposed sections
38.2 and 284.12(b)(4) as proposed in the NOPR. The Commission finds
that the nature and scope of non-public, operational information that
may expressly be shared under the rule, including commercially
sensitive, customer-specific information, warrants limiting the blanket
authorization of the exchange of such information granted herein to
interstate natural gas pipelines and public utilities that own,
operate, or control facilities used for the transmission of electric
energy in interstate commerce subject to the Commission's
jurisdiction.\82\ As discussed below, we decline to authorize in this
Final Rule the disclosure of non-public, operational information, which
may include commercially sensitive, customer specific information, to
LDCs, intrastate pipelines, or gatherers. However, we clarify that the
No-Conduit Rule adopted in this Final Rule only applies to the non-
public, operational information an electric transmission operator
provides to the interstate pipeline pursuant to this rule or vice
versa. Therefore, the No-Conduit Rule adopted in this Final Rule does
not otherwise affect the ability of interstate natural gas pipelines to
exchange operational information among themselves or with LDCs
regarding actual or potential pipeline or distribution system
operational conditions affecting the gas flow between these physically
interconnected parties. Nor does it affect the ability of an electric
transmission operator to share its own information with an LDC, if
otherwise permitted under its tariff. Similarly, the No-Conduit Rule
does not otherwise affect the ability of interstate natural gas
pipelines and intrastate natural gas pipelines and gatherers to
exchange operational information regarding operational conditions
affecting the gas flows between these physically interconnected
parties. Moreover, this Final Rule does not prohibit electric
transmission operators from sharing non-public, operational information
received from a pipeline pursuant to this Final Rule with LDCs, if the
information sharing and appropriate safeguards to prevent inappropriate
use or disclosure of shared information is separately authorized by the
Commission, for example pursuant to a FPA section 205 tariff filing by
an ISO or RTO.
---------------------------------------------------------------------------
\82\ Wholesale Competition in Regions with Organized Electric
Markets, Order No. 719, FERC Stats. & Regs. ] 31,281 at P 423 (2008)
(cross-referenced at 125 FERC ] 61,071 (2008)) (Commission
determined that it was necessary to retain the practice of masking
the identity of participants when releasing offer and bid data).
---------------------------------------------------------------------------
57. We recognize that LDCs and other parties do have a significant
role to play in maintaining reliability of both interstate natural gas
pipeline transportation systems and electric transmission systems, as
the commenters point out, particularly since many electric generators
take service from LDCs, rather than directly from interstate pipelines.
However, because the Commission generally does not have jurisdiction
over LDCs, and because the scope of the authorized non-public,
operational information exchange between interstate natural gas
pipelines and electric transmission operators under this Final Rule is
broad, we are reluctant to authorize blanket authority for interstate
natural gas pipelines or electric transmission operators to pass such
information to non-jurisdictional LDCs. Instead, we prefer to proceed
on a case-by-case basis with respect to electric transmission operators
sharing non-public, operational information received from a pipeline
pursuant to this Final Rule with LDCs. Electric transmission operators
that see the need for such communication given the circumstances on
their systems may develop tariff provisions that establish acceptable
procedures for the handling and protection from inappropriate
disclosure or use of such information.\83\
---------------------------------------------------------------------------
\83\ For example, such tariff conditions might require the LDC
to enter into a non-disclosure agreement (NDA).
---------------------------------------------------------------------------
58. For example, in a recent, unprotested tariff filing by the
California Independent System Operator (CAISO),\84\ CAISO amended its
tariff to specifically authorize the CAISO to share, under a non-
disclosure agreement, outage information with natural gas transmission
and distribution utilities operating interstate and/or intrastate
natural gas pipelines
[[Page 70174]]
that serve natural gas-fired generation resources within the CAISO
Balancing Authority Area, with or without notice to the affected market
participant. The information CAISO may share includes, but is not
limited to, the identity of individual natural gas-fired generation
resources that are needed to support reliability of the CAISO Balancing
Authority Area in the event of a natural gas shortage, natural gas
pipeline testing and maintenance, or other curtailment of natural gas
supplies. If they believe it necessary or appropriate, other electric
transmission operators may make similar FPA section 205 tariff filings
to facilitate greater sharing of non-public, operational information
received from a pipeline pursuant to this Final Rule with entities such
as LDCs. We encourage those electric transmission operators that are
concerned about generators that are located behind an LDC to consider
developing such tariff revisions.
---------------------------------------------------------------------------
\84\ Cal. Indep. Sys. Operator Corp., Docket No. ER12-278-000
(Dec. 8, 2011) (delegated letter order).
---------------------------------------------------------------------------
59. AGA requests clarification as to the whether the term pipeline
includes intrastate pipelines. The Commission clarifies that the term
``pipeline'' in section 284.12(b)(4) adopted in this Final Rule refers
to interstate natural gas pipelines that transport gas under subparts B
or G of Part 284.\85\ Section 284.12(b)(4) is a new subsection of
existing section 284.12(b). The first sentence of that section makes
clear that the word ``pipeline'' as used throughout section 284.12(b)
refers only to ``an interstate pipeline that transports gas under
subparts B or G of this part.'' Thus, an intrastate or Hinshaw pipeline
providing interstate service under Part 284 of the Commission's
regulations is not a ``pipeline'' for purposes of section 284.12(b)(4).
---------------------------------------------------------------------------
\85\ See 18 CFR 284.12(b) (2013).
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D. The No-Conduit Rule and Competitive Concerns
1. NOPR
60. In the NOPR, the Commission proposed to adopt a No-Conduit Rule
that would prohibit all public utilities and interstate natural gas
pipelines, as well as their employees, contractors, consultants, or
agents, from disclosing, or using anyone as a conduit for the
disclosure of, non-public, operational information they receive under
this rule to a third party or to its marketing function employees, as
that term is defined in section 358.3 of the Commission's regulations.
The Commission stated that the No-Conduit Rule, in addition to
protections already in place, would ensure that any non-public,
operational information shared under the proposed regulations remains
confidential and is shared among transmission operators in a manner
that is consistent with the prohibition on undue discrimination.\86\
---------------------------------------------------------------------------
\86\ NOPR, FERC Stats. & Regs. ] 32,699 at P 26 (cross-
referenced at144 FERC ] 61,043).
---------------------------------------------------------------------------
61. In describing the need for the No-Conduit Rule, the Commission
explained that the existing No-Conduit Rule under the Standards of
Conduct would not sufficiently limit the disclosure of the information
received under this proposed rule.\87\ Therefore, the Commission
proposed a No-Conduit Rule tailored to the entities and information
covered by the proposed rule and extends the disclosure prohibition to
non-affiliates.
---------------------------------------------------------------------------
\87\ Id. P 26 & n. 50.
---------------------------------------------------------------------------
62. The Commission also noted the concerns expressed by some
entities that generator-specific, non-public information provided to a
pipeline by an electric transmission operator could provide the
pipeline with a competitive advantage over the generator in pricing
transportation services.\88\ The Commission found no need to propose
additional protections regarding interstate natural gas pipeline
transportation. The Commission reasoned that interstate pipelines are
required to allocate service, on a not unduly discriminatory basis,
based on their tariffs, at a rate not exceeding the just and reasonable
rate on file. The Commission also explained that pipelines are not
required to discount services, and if they choose to discount, are
permitted to obtain information from any source to demonstrate that the
shipper requesting the discount has competitive alternatives.\89\
---------------------------------------------------------------------------
\88\ Id. P 27.
\89\ Id.
---------------------------------------------------------------------------
63. The Commission stated that unauthorized disclosure of any non-
public, operational information may subject the entity or individual
making the prohibited disclosure to the enforcement provisions of the
FPA and NGA, including potential civil penalties.\90\
---------------------------------------------------------------------------
\90\ Id. P 26 & n. 52 (citing section 22 of the NGA, 15 U.S.C.
717t2-1 (2012), and section 316A of the FPA, 16 U.S.C. 825o-1
(2012)).
---------------------------------------------------------------------------
64. Thirteen commenters filed in support of the proposed No-Conduit
Rule.\91\ Arguing that the No-Conduit Rule was either too strict or not
strict enough, several commenters proposed modifications to or
requested clarifications of the No-Conduit Rule. Those comments are
discussed below.
---------------------------------------------------------------------------
\91\ AEP Comments at 5-6; CAISO Comments at 5; Duke Energy
Comments at 3; ELCON Comments at 3; EPSA Comments at 7; MISO
Comments at 2; MMWEC Comments at 5; NESCOE Comments at 4,6; NRECA
Comments at 5; NYTOs Comments at 1; PG&E Comments at 2-3; PUCO
Comments at 5; TVA Comments at 3.
---------------------------------------------------------------------------
2. Adequacy of No-Conduit Rule To Protect Against Competitive Harm
a. Comments
65. Several commenters are concerned that the proposed No-Conduit
Rule is inadequate to prevent the misuse of non-public, operational
information exchanged between electric transmission operators and
pipelines and protect against competitive harm to generators, natural
gas marketers, and others. These commenters recommend that the
Commission adopt various modifications to the No-Conduit Rule or place
additional limits on the information which transmission operators may
share, as discussed below.\92\
---------------------------------------------------------------------------
\92\ AEP Comments at 6; APGA Comments at 2-3; Duke Comments at
3; NGSA Comments at 2-3; and PUCO Comments at 7.
---------------------------------------------------------------------------
66. EPSA and NGSA seek clarification that the No-Conduit Rule
covers non-operational interstate natural gas pipeline employees that
market transportation capacity.\93\ NGSA states that giving access to
non-public, operational information to pipeline capacity marketing
employees that negotiate shipper discounts could be problematic.\94\
NGSA states that, for example, a pipeline capacity marketing employee
could decide not to discount interruptible capacity because they have
prior knowledge of a transmission operator's intent to ramp up gas-
fired generators, increasing demand on the pipeline. Or, the pipeline
capacity marketing employee could use knowledge of upcoming generator
outages to lower interruptible prices for a period to compete with
capacity releases. NGSA states that, while the Commission correctly
notes that its non-discrimination rules already forbid any
discriminatory behavior, it still would seem prudent to limit access to
non-public, operational information for pipeline transportation
capacity sellers.\95\
---------------------------------------------------------------------------
\93\ EPSA Comments at 4; NGSA Comments at 4-6.
\94\ NGSA Comments at 4.
\95\ Id. at 5.
---------------------------------------------------------------------------
67. Washington Gas is concerned that the NOPR does not explain how
information can or cannot be shared within a public utility that
receives non-public operating information.\96\ Washington Gas contends
that if the generator employees only serve the function of purchasing
gas--rather than selling energy at wholesale--they may not come within
the definition of
[[Page 70175]]
``marketing function employees'' because the currently effective
Standards of Conduct do not consider gas purchasing to be a marketing
function activity. Washington Gas argues, if non-public information is
shared within a public utility, it would create a preference for public
utility-owned generation over independent generators because
independent generators would be ``third parties'' prohibited from
information sharing. Washington Gas concludes that, if the Commission
relies on a No-Conduit Rule to protect information from reaching beyond
transmission function employees, the Commission should provide detailed
examples of exactly how the No-Conduit Rule will be implemented to
protect the fairness of the market and assure that no shipper is
afforded an undue preference.\97\
---------------------------------------------------------------------------
\96\ Washington Gas Comments at 10.
\97\ Id. at 11.
---------------------------------------------------------------------------
68. Washington Gas claims that the best way to resolve the tension
between information sharing and market fairness is to continue to make
critical operating information public. Washington Gas contends that
certain of the examples of ``non-public, operational information''
listed in the NOPR should never be considered non-public, operational
information.\98\ Rather, Washington Gas contends, this information
should be considered public information to be promptly posted.
Washington Gas believes that the only information properly shared on a
non-public basis would be transaction-specific information.\99\
Accordingly, Washington Gas urges the Commission to clarify that all
pipeline facility outage and maintenance information needs to be made
public and posted on the pipeline's internet Web site and to establish
clear instructions as to what exact information must be posted and what
can be shared voluntarily in a non-public way.\100\
---------------------------------------------------------------------------
\98\ Id. at 3.
\99\ Id. at 4.
\100\ Id. at 3-4.
---------------------------------------------------------------------------
69. Similar to Washington Gas, AGA states that it assumes that the
Commission would continue to require interstate pipelines to provide
all shippers with equal access to information regarding system
conditions, maintenance schedules and outages, and available capacity
so as not to create competitive advantages for certain shippers.\101\
---------------------------------------------------------------------------
\101\ AGA Comments at 5 & n. 14.
---------------------------------------------------------------------------
70. PUCO supports the proposed No-Conduit Rule, but contends that
proposed section 38.2 should be modified to include additional language
to require that no non-public information be shared with any person or
company affiliate except to ensure the reliable and efficient
operations of the pipeline, transmission grid, and the delivery of
generation service.\102\
---------------------------------------------------------------------------
\102\ PUCO Comments at 5.
---------------------------------------------------------------------------
71. Duke Energy notes that there are a number of small public
utilities who currently have waivers of the requirement to abide by the
Standards of Conduct or are otherwise not subject to the Standards of
Conduct. Duke Energy requests that the Commission address its concern
that these entities could receive commercially sensitive and non-public
transmission information under the NOPR which could potentially give
them an unfair advantage.\103\
---------------------------------------------------------------------------
\103\ Duke Energy Comments at 3.
---------------------------------------------------------------------------
72. To alleviate concerns of confidential information disclosure,
TVA recommends that, in addition to the No-Conduit Rule, the Commission
should encourage and support the execution of confidentiality
agreements between electric transmission operators and natural gas
pipelines relative to these discussions.\104\
---------------------------------------------------------------------------
\104\ TVA Comments at 3-4.
---------------------------------------------------------------------------
73. ELCON proposes two modifications to the No-Conduit Rule. First,
ELCON asserts that the Commission should require electric transmission
operators and interstate natural gas pipelines to submit an annual
filing with the Commission listing entities with whom they have entered
into information sharing arrangements and further certify that they
acknowledge and comply with the No-Conduit Rule. Second, ELCON argues
that the Commission should require electric transmission operators and
pipelines to maintain and implement a written compliance policy.\105\
---------------------------------------------------------------------------
\105\ ELCON Comments at 3.
---------------------------------------------------------------------------
74. PUCO also maintains that the Commission should, via an
expansion of the instant proceeding, arrive at the appropriate
requisite sanctions for the inappropriate sharing of potentially
commercially sensitive, non-public information in violation of the No-
Conduit Rule.\106\
---------------------------------------------------------------------------
\106\ PUCO Comments at 5.
---------------------------------------------------------------------------
75. Some commenters expressed concern about the scope of the non-
public, operational information to be shared under the rule based on
competitive concerns about the use of that information. NGSA is also
concerned that the NOPR could allow transmission operators to share
commercially sensitive information that could harm producers and
marketers by revealing their positions in the market to outside
parties.\107\ NGSA states, for example, that a marketer's commercial
strategy could be revealed if the confidential details of the
scheduling priorities it has contracted with its clients were
shared.\108\ NGSA further contends that while it may be useful for
utility operators to share information on overall pipeline capacity,
sharing commercially sensitive information such as individual shipper
nominations offers little insight into the reliability of deliveries
and could cause significant harm to some market participants.\109\
---------------------------------------------------------------------------
\107\ NGSA Comments at 7.
\108\ Id.
\109\ Id.
---------------------------------------------------------------------------
76. Along the same lines, PUCO argues that electric transmission
operators should be required to furnish pipelines with aggregated, non-
unit specific generation data to ensure against inadvertently providing
pipelines with confidential or proprietary information that could
result in a competitive advantage concerning the pricing of gas to that
facility.\110\
---------------------------------------------------------------------------
\110\ PUCO Comments at 7.
---------------------------------------------------------------------------
b. Commission Determination
77. In this Final Rule, the Commission adopts the proposed No-
Conduit Rule as set forth in sections 38.2(b) and 284.12(b)(4)(ii) of
the NOPR, without modification. The No-Conduit Rule prohibits all
public utilities and interstate natural gas pipelines, as well as their
employees, contractors, consultants, or agents, from disclosing, or
using anyone as a conduit for the disclosure of, non-public,
operational information they receive under this rule to a third party
or to its marketing function employees, as that term is defined in
Sec. 358.3 of the Commission's regulations. The Commission concludes
that the No-Conduit Rule, as proposed, is necessary to ensure that any
non-public, operational information shared under the regulations in
this Final Rule remains confidential and is shared among transmission
operators in a manner that is consistent with the prohibition on undue
discrimination. As several commenters, including generators, pointed
out, the No-Conduit Rule addresses many of the concerns over the
sharing of commercially sensitive, customer-specific information among
transmission operators.
78. At this time, we do not see the need to expand the No-Conduit
Rule to explicitly prohibit disclosures to other employees or entities.
We believe that, through this Final Rule and other Commission rules and
regulations, we have adequate safeguards in place. In
[[Page 70176]]
response to the comments received, we take this opportunity to explain
the Commission's requirements associated with the sharing of
information and remind industry of the information already made
available by the Commission's regulations.
79. Washington Gas, NGSA, and EPSA assert that certain employees
may fall outside the Standards of Conduct definition of ``marketing
function employees'' and therefore may receive information under this
Final Rule, and be in a position to use that information to provide an
undue preference.
80. First, Washington Gas expresses concern that the proposed rule
does not explain how non-public, operational information received by a
public utility can or cannot be shared within that public utility,
including with employees that fall outside the definition of
``marketing function employee,'' in particular, public utility
employees that purchase gas. In Order Nos. 717 and 717-A, the
Commission restricted its affiliate rule to cover only those employees
that participate in electric sales markets and eliminated or rejected
proposals that would have expanded the rule to cover other
employees.\111\ The Commission explained:
---------------------------------------------------------------------------
\111\ See Standards of Conduct for Transmission Providers, Order
No. 717, FERC Stats. & Regs. ] 31,280 at PP 77, 103 (cross-
referenced at 125 FERC ] 61,064 (2008)); Order No. 717-A, FERC
Stats. & Regs. ] 31,297 at P 35 (cross-referenced at 129 FERC ]
61,043 (2009)).
The Commission agrees that restricting the definition of
marketing functions to include only sales, rather than purchases,
more closely matches the statutory prohibitions against undue
preferences. Furthermore, the removal of purchases from the
definition of marketing functions frees companies to conduct the
informational exchanges necessary to engage in integrated resource
planning . . . .\112\
---------------------------------------------------------------------------
\112\ Order No. 717, FERC Stats. & Regs ] 31,280 at P 77 (cross-
referenced at 129 FERC ] 61,043 (footnotes omitted). See also Order
No. 717-A, FERC Stats. & Regs. ] 31,297 at P 35 (cross-referenced at
129 FERC ] 61,043) (explaining that restricting the definition of
marketing function to include only sales more closely matches the
statutory prohibitions against undue preference. Specifically,
sections 205 and 206 of the Federal Power Act prohibit undue
preference or advantage to any person with respect to ``any
transmission or sale subject to the jurisdiction of the Commission.
. . .'' Similarly, sections 4 and 5 of the Natural Gas Act prohibit
undue preference with respect to ``any transportation or sale of
natural gas subject to the jurisdiction of the Commission.).
For similar reasons, the Final Rule is limited and therefore we
find it is not appropriate to expand the No-Conduit Rule adopted here
to include employees who are not ``marketing function employees,'' such
as gas purchasing employees.
81. In addition, Washington Gas has not provided sufficient reason
to expand the No-Conduit Rule to gas purchasing employees or other
employees of the public utility who are not marketing function
employees. In this Final Rule the Commission's intent is to remove
barriers to the sharing of non-public, operational information between
transmission operators for the purpose of promoting reliable service
and operational planning. While certain gas purchasing employees may
fall outside the definition of marketing function employees, within a
vertically integrated utility, it may be necessary for an electric
transmission operator, based on information received by an interstate
natural gas pipeline, to inform its gas purchasers that it needs
additional natural gas at another generating unit. Restricting such
internal disclosure may limit the effectiveness of any such
communication in responding to operational problems.
82. Moreover, under section 284.13(d) of the Commission
regulations,\113\ pipelines are already required to post important
capacity and outage information at each scheduling opportunity. This
includes ``equal and timely access to information relevant to the
availability of all transportation services whenever capacity is
scheduled, including, but not limited to, the availability of capacity
at receipt points, on the mainline, at delivery points, and in storage
fields; whether the capacity is available directly from the pipeline or
through capacity release; the total design capacity of each point or
segment on the system; the amount scheduled at each point or segment
whenever capacity is scheduled; and all planned and actual service
outages or reductions in service capacity.'' Washington Gas has not
provided sufficient justification that, given the extent of these
posting requirements, the potential risks it identifies associated with
permitting the exchange of non-public, operational information between
transmission operators, outweighs the efficiency and reliability
benefits of permitting such communications.
---------------------------------------------------------------------------
\113\ 18 CFR 284.13(d) (2013).
---------------------------------------------------------------------------
83. While non-public, operational information falls outside of the
posting requirements, we are not convinced such information needs to be
disclosed to all shippers. For example, certain information may be
relevant only to the operations of the public utility and may not need
to be disclosed to all shippers.
84. We also deny EPSA's and NGSA's requests to expand the No-
Conduit Rule to prohibit disclosures to interstate natural gas pipeline
employees who market pipeline capacity, as well as PUCO's request to
require electric transmission operators to furnish pipelines
aggregated, non-unit specific generation data to ensure against
providing pipelines with confidential or proprietary information that
could result in a competitive advantage concerning the pricing of gas
to that facility. The Commission agrees with NGSA that ``marketing
function employees,'' as that termed is defined in the Standard of
Conduct, does not include employees that market transportation
capacity. However, EPSA and NGSA have not shown that employees who
market pipeline capacity can use non-public, operational information
shared under this Final Rule to provide an undue preference or unduly
discriminate in a manner inconsistent with the Commission's policies or
regulations. NGSA's specific concern is that employees who market
transportation capacity could use non-public, operational information
shared under this rule to discriminate in their allocation or pricing
of capacity. In response, we note that interstate natural pipelines are
required by the NGA and their tariffs to allocate service on a not
unduly discriminatory basis at a rate not exceeding the just and
reasonable rate on file. Further, the Commission does not require
pipelines to discount services below the pipeline's maximum tariff
rate, which the Commission has found just and reasonable. If a pipeline
chooses to provide selective discounts based on the elasticity of
demand of its customers,\114\ the pipeline needs to obtain information
to demonstrate that a shipper requesting a discount does have
competitive alternatives justifying the discount in order to ensure
that it treats all similarly situated customers on a comparable
basis.\115\
---------------------------------------------------------------------------
\114\ See Associated Gas Distributors v. FERC, 824 F.2d 981
(D.C. Cir. 1987) (permitting selective discounting only when
justified by competitive alternatives and elastic demand
conditions); Williston Basin Interstate Pipeline Co., 85 FERC ]
61,247 (1998) (finding that a pipeline does not necessarily have to
offer the same discount to all customers at a point when the
pipeline knows, if some customers at the point have elastic demand,
while others have inelastic demand).
\115\ See, e.g., Panhandle Eastern Pipe Line Co., Opinion No.
395, 71 FERC ] 61,228, at 61,867 (1995) (Commission cited to
pipeline's policy of requiring documentation from its customers
detailing the competitive circumstances justifying their need for a
discount, such as potentially sensitive information concerning the
end use customer for whom the gas will be transported, and
competitive energy supplies, including the customer's source and
cost of alternative natural gas supplies or the type and cost of
alternative fuels); Panhandle Eastern Pipe Line Co., Opinion No.
404, 74 FERC ] 61,109, at 61,405 (1996).
---------------------------------------------------------------------------
[[Page 70177]]
85. We also deny PUCO's request to expand the No-Conduit Rule to
require that non-public, operational information not be shared with any
person or company affiliate except to ensure the reliable and efficient
operations of the pipeline, transmission grid, and the delivery of
generation service. As we explain elsewhere in this Final Rule, the
Commission is concerned that adding further qualifiers to the
definition of operational information will restrict the flexibility of
transmission operators to determine what information it must share to
promote reliable service and engage in effective operational planning.
Moreover, adding further qualifiers is unnecessary, given our
conclusion that the existing safeguards (e.g., the Standards of
Conduct, prohibition against undue discrimination or preference,
prohibition on market manipulation) together with the third-party
limitation in the No-Conduit Rule we are putting in place are
sufficient to protect against unnecessary disclosure.
86. TVA proposes that, in addition to the No-Conduit Rule, the
Commission require confidentiality agreements, while ELCON proposes
that the Commission also require annual filings and written compliance
procedures. Under this Final Rule, communication and sharing of non-
public, operational information is voluntary. While the Commission will
not embed such a requirement in its regulations, we note that CAISO and
ISO-NE have both adopted such practices, and this Final Rule does not
prescribe the mechanics of how voluntary sharing will be conducted. To
the extent a transmission operator has a need for additional or changed
information sharing procedures such as confidentiality agreements, the
Commission will evaluate such requests on a case-by-case basis. With
respect to PUCO's comments regarding sanctions, the Commission
reiterates that unauthorized disclosure of any non-public, operational
information may subject the entity or individual making the prohibited
disclosure to the enforcement provisions of the FPA and NGA, including
potential civil penalties.\116\ The Commission declines to further
delineate the specific sanctions that might apply in the event of an
unauthorized disclosure, as any sanctions would need to be tailored to
the facts and circumstances of the disclosure at issue.
---------------------------------------------------------------------------
\116\ See Section 22 of the NGA, 15 U.S.C. 717t2-1 (2012), and
section 316A of the FPA, 16 U.S.C. 825o-1 (2012).
---------------------------------------------------------------------------
87. Duke argues that some small public utilities that currently
have waivers of the requirement to abide by the Standards of Conduct
could be given an unfair advantage if they receive commercially
sensitive and non-public transmission information under the Final Rule.
The Commission clarifies that existing waivers from the Standards of
Conduct do not automatically apply to the No-Conduit Rule adopted in
this Final Rule. That is, an existing waiver of the Standards of
Conduct does not waive the No-Conduit Rule adopted here. In this Final
Rule, the Commission is expressly authorizing the exchange of non-
public, operational information that could include commercially
sensitive, customer-specific information. The No-Conduit Rule was
developed to address concerns that broadly sharing this kind of
information with marketing function employees or third parties could
cause competitive harm. Given that the information covered by this rule
is potentially commercially sensitive, the Commission finds that a
determination as to whether a waiver of the No-Conduit Rule adopted
here is appropriate is best made on an individual basis, pursuant to a
filing under FPA section 205 or NGA section 4.
88. In response to comments raising general concerns about the
competitive impact of the use of non-public, operational information
exchanged under this rule, the Commission finds that the No-Conduit
Rule is sufficient to address these concerns. For example, NGSA asserts
that a natural gas marketer's commercial strategy could be revealed if
the confidential details of the scheduling priorities it has contracted
with its clients are revealed. While the Commission recognizes that a
natural gas marketer's scheduling priorities for its downstream clients
are commercially sensitive, the No-Conduit Rule should ensure that the
electric transmission operators, with whom pipelines may share such
information, do not disclose that information to third party
participants in the natural gas sales market. NGSA has not explained
how a pipeline's sharing of a natural gas marketer's nominations with
an electric transmission operator would cause competitive harm to the
natural gas marketer, so long as the electric transmission operator
complies with the No-Conduit Rule.
89. The Commission similarly is not persuaded by PUCO's concern
that an electric transmission operator's sharing of confidential unit-
specific generator information with interstate pipeline providers could
result in ``a competitive advantage concerning the pricing of gas to
that facility.'' \117\ Interstate natural gas pipelines only provide
unbundled transportation service and do not sell gas except for
incidental sales required for the conduct of their transportation
service. As discussed above, there are protections already in place to
prevent undue discrimination or preference in the pipeline's sale of
transportation service.\118\ Given the protections already in place, we
see no need to propose additional protections regarding pipeline
transportation at this time.
---------------------------------------------------------------------------
\117\ PUCO Comments at 7.
\118\ See, e.g., 18 CFR 284.286 (2013).
---------------------------------------------------------------------------
3. Exceptions to the No-Conduit Rule
a. Comments
90. Several parties contend that the No-Conduit Rule is too
restrictive and recommend that the Commission adopt various
modifications, as discussed below. For example, NE Gas Industry and
INGAA request that the proposed No-Conduit Rule be modified in the
Final Rule to include an exception to allow sharing of non-public,
operational information between all relevant industry participants in
an emergency.\119\ INGAA, for example, states that there should be no
limit on sharing of non-public, operational information between
transmission operators during an emergency, including communications
between third parties, subject to a record of the exchange as soon as
practicable after the fact.\120\ NE Gas Industry and INGAA propose that
communications in such emergencies could include RTOs and ISOs,
interstate natural gas pipelines, generators of all fuel types, LDCs,
liquefied natural gas suppliers, producers, marketers, asset managers,
and other relevant participants in the energy industry.\121\
Alternatively, NE Gas Industry requests that the Commission clarify
that the No-Conduit Rule does not prohibit such larger group
discussions and apart from the Final Rule, pipelines and public
utilities are permitted to share non-public, operational information
with all relevant entities as necessary to mitigate or solve an
emergency that threatens the reliability of electric or natural gas
service.
---------------------------------------------------------------------------
\119\ NE Gas Industry at 3-4, INGAA Comments at 7. NE Gas
Industry states that existing focus groups and joint industry task
forces in New England can serve as the mechanisms to facilitate such
open communication in times of emergency.
\120\ INGAA Comments at 7.
\121\ NE Gas Industry Comments at 5; INGAA Comments at 7.
---------------------------------------------------------------------------
91. In its reply comments, NGSA states that the Commission should
deny requests to suspend the communications rules during emergencies or
clearly define what
[[Page 70178]]
constitutes an emergency.\122\ NGSA is concerned that identifying what
situations constitute an emergency can be subjective. NGSA states that
at a minimum, the Commission should strictly maintain the No-Conduit
Rule, restricting communications to operational (i.e. non-marketing)
employees, at all times, regardless of any relaxation of the associated
communications rules.
---------------------------------------------------------------------------
\122\ NGSA Reply Comments at 5.
---------------------------------------------------------------------------
92. Enable contends that the Commission should adopt a modified
version of the No-Conduit Rule that allows interstate pipelines to
share non-public, operational information with non-marketing function
employee third parties for the purpose of promoting reliable service
and operational planning.\123\ Enable asserts that the NOPR provides no
rational basis for distinguishing between (A) ``non-public, operational
information'' received from electric public utilities through this new
regime, which interstate natural gas pipelines are barred from
disclosing to anyone, and (B) general ``non-public, operational
information,'' which pipelines may share with non-marketing function
employees for operational reasons.\124\ Enable asserts that currently,
interstate pipelines receive non-public, operational information from a
variety of sources and the NOPR sets forth no evidence that such
information, when received from public utilities, would not be
sufficiently protected by the current No-Conduit Rule as stated in the
Standards of Conduct or by a less restrictive No-Conduit Rule.\125\
Enable states that the NOPR gives interstate gas pipelines access to
information from electric public utilities for the purpose of improving
reliability, but at the same time bars those pipelines from sharing
such information with third parties with whom they would normally share
operational information for that purpose (e.g., interconnected
intrastate and gathering lines).\126\
---------------------------------------------------------------------------
\123\ Enable Comments at 9-10.
\124\ Id. at 6.
\125\ Id.
\126\ Id.
---------------------------------------------------------------------------
93. Enable also contends that the NOPR's No-Conduit Rule creates
two classifications of ``non-public, operational information'' and
different rules regarding interstate pipelines' sharing of each,
thereby imposing significant administrative burdens and compliance
challenges on the pipelines.\127\ Enable states that under the current
rules, interstate pipelines may exchange information with employees of
their intrastate pipeline and gathering affiliates, provided those
employees are not marketing function employees. Enable states that the
proposed No-Conduit Rule creates an inconsistency and potential
compliance difficulty because these employees of the non-jurisdictional
affiliates would be allowed to receive some operational information but
not the new category of non-public information received from electric
public utilities.\128\ Enable states that the proposed No-Conduit Rule
renders impractical--if not impossible--interstate pipelines'
otherwise-appropriate sharing of non-marketing function employees with
affiliated intrastate pipelines and gatherers.\129\ Additionally,
Enable states that interstate pipelines will need to implement two
separate compliance walls regarding operational information: one wall
to prevent the disclosure of non-public transmission function
information or customer information (directly or through a conduit) to
the pipeline's marketing function employees; and another wall to
prevent the disclosure of non-public, operational information received
from public utilities to the pipeline's marketing function employees or
to any third party (including the pipeline's own intrastate pipeline
and gathering affiliates).\130\
---------------------------------------------------------------------------
\127\ Id. at 7.
\128\ Id.
\129\ Id. at 8.
\130\ Id.
---------------------------------------------------------------------------
94. Enable maintains that the NOPR does not identify a need for the
absolute prohibition against interstate pipelines' disclosure of
operational information to non- marketing function employee third
parties for the purpose of system reliability.\131\ Enable argues that
the NOPR points only to the theoretical threat of harmful disclosure of
the electric public utility's non-public information and undue
discrimination or preference and provides no explanation of how the
potential danger of improper disclosure by interstate pipelines,
unsupported by a record of abuse, justifies such a broad and burdensome
prophylactic rule.
---------------------------------------------------------------------------
\131\ Id. at 9 (citing National Fuel Gas Supply Corp. v. FERC,
468 F.3d 831, 844 (D.C. Cir. 2006) (indicating that FERC must supply
a factual basis for its administrative actions or, in the absence of
such a basis, explain how potential dangers, unsupported by a record
of abuse, justifies costly rules); 5 U.S.C. 553(c) (``After
consideration of the relevant matter presented [through notice and
comment], the agency shall incorporate in the rules adopted a
concise general statement of their basis and purpose.''); Motor
Vehicle Mfrs. Ass'n of U.S, Inc. v. State Farm Mut. Auto. Ins. Co.,
463 U.S. 29, 56 (1983) (requiring agency to explain reasons for
decision); St. James Hosp. v. Heckler, 760 F.2d 1460, 1469 (7th Cir.
1985) (finding explanation for rule not adequately supported by
evidence offered as justification)).
---------------------------------------------------------------------------
95. AGA and Duke Energy express concern that the proposed No-
Conduit Rule could be interpreted to prohibit communications that are
currently permitted under the Standards of Conduct.\132\ Specifically,
AGA and Duke maintain the rule should not prevent a public utility or
interstate pipeline from disclosing non-public, operational information
to a third-party LDC, especially where such information would promote
reliable service or operational planning with regard to gas-fired
generators located on an LDC's system.
---------------------------------------------------------------------------
\132\ AGA Comments at 7, Duke Energy Comments at 3.
---------------------------------------------------------------------------
b. Commission Determination
96. As stated above, the Commission adopts the No-Conduit Rule as
set forth in the NOPR, without modification. The non-public,
operational information permitted to be shared under this Final Rule
could include the exchange of confidential generator information, and
as explained below, the scope of the information allowed to be shared
under this Final Rule warrants the restrictions in the No-Conduit Rule,
as proposed.
97. AGA, Duke Energy and Enable request exceptions to the third
party restriction in the No-Conduit Rule. The Commission denies these
requests. As stated earlier, the No-Conduit Rule does not prohibit
transmission operators from sharing their own operational information
with other interconnecting entities involved in ensuring the
reliability of system operations, such as LDCs, intrastate pipelines or
gathering facilities. The No-Conduit Rule only applies to the
subsequent disclosure of non-public, operational information, including
commercially sensitive, customer-specific information, received by an
interstate natural gas pipeline or electric transmission operator under
the rule and does not otherwise affect the ability of an interstate
natural gas pipeline or electric transmission operator to exchange
operational information about its own system with its customers/
stakeholders or members under the same rules and conditions as it
currently does. Moreover, the information that may permissibly be
shared under this rule is not limited to ``transmission function''
information covered under the Standards of Conduct. The scope of
information that transmission operators may permissibly share under
this rule is broader than transmission function information and, as a
result therefore warrants the restriction on disclosure to third
parties,
[[Page 70179]]
as well as marketing function employees, via the No-Conduit Rule.
98. The Commission similarly denies NE Gas Industry's and INGAA's
requests that, if the Commission does not eliminate the third-party
prohibition, the Commission at least include an exception to permit
sharing of non-public, operational information between all relevant
industry participants during emergencies. We see little reason to
create an emergency exception since, as we explained, the Final Rule
does not otherwise affect the ability of an interstate natural gas
pipeline or electric transmission operator to exchange operational
information about its own system with its customers/stakeholders or
members under the same rules and conditions as it is currently does,
including during an emergency. In addition, the Commission clarifies
that the proposed No-Conduit Rule does not prohibit, either during
routine or emergency circumstances, electric transmission or interstate
natural gas pipeline operators from jointly and simultaneously
communicating non-public, operational transmission or transportation
information (except for customer-specific information) with all market
participants. Because such information is being shared
contemporaneously with all market participants, it would not be
considered non-public and its disclosure would not be unduly
preferential or discriminatory. Undue discrimination concerns only
arise when communications take place with some, but not all, market
participants.
99. Enable is concerned that the proposed No-Conduit Rule creates a
new compliance issue for pipeline companies that have operational
personnel who are involved in operational planning for an interstate
pipeline and affiliated gathering facilities or intrastate pipelines.
While the No-Conduit Rule would prohibit such disclosures to the
employees shared with the affiliated gathering facilities or intrastate
pipeline, we do not find that a broad exemption for communication of
the non-public, operational information is warranted. To the extent
that interstate natural gas pipelines share operational employees with
LDCs or other affiliates, which makes compliance with the No-Conduit
Rule difficult, the interstate natural gas pipelines can seek a waiver
of this Final Rule's No-Conduit Rule.
III. Questions Posed by the Commission
A. Generator to Electric Transmission Operator Communications
1. NOPR
100. In the NOPR, the Commission recognized that although the
proposal applies only to communications between interstate natural gas
pipelines and electric transmission operators, natural gas-fired
generators may have relevant information regarding their own
capabilities to acquire natural gas (or other fuels) not available to
the interstate natural gas pipeline serving the generator.\133\
Therefore, the Commission sought comments on whether additional
regulations were needed to require a generator to inform its electric
transmission operator of the possibility its natural gas service may be
disrupted. As an example, the Commission asked whether a generator
should be required, at the request of the electric transmission
operator, to provide its electric transmission operator with
information pertaining to any communications received from an
interstate natural gas pipeline regarding potential failures by the
generator to conform to flow rates or nominations.
---------------------------------------------------------------------------
\133\ NOPR, FERC Stats. & Regs. ] 32,699 at P 25 (cross-
referenced at 144 FERC ] 61,043).
---------------------------------------------------------------------------
2. Comments
101. EEI, EPSA, MISO, MMWEC, NEPGA, NRECA, and PG&E believe that
additional regulations requiring information sharing between generators
and electric transmission operators are not necessary.\134\ On the
other hand, the IRC, ISO-NE., NYISO, and NYPSC support additional
regulations requiring generators to share information regarding their
fuel status with an electric transmission operator.\135\ Likewise, in
the absence of cooperative information sharing, APPA, MMWEC, NRECA and
the NE Gas Industry believe that additional regulations should be
implemented to ensure information sharing.\136\
---------------------------------------------------------------------------
\134\ EEI Comments at 5-6; EPSA Comments at 4-5; MISO Comments
at 4; MMWEC Comments at 4; NEPGA Comments at 4-5; NRECA Comments at
8; PG&E Comments at 5.
\135\ IRC Comments at 4, ISO-NE Comments at 8-9, NYISO Comments
at 2; NYPSC Comments at 5. NYPSC states that if the Commission
requires a generator to provide its electric transmission operator
communications received from a natural gas pipeline, the NYPSC would
also include communications from the LDC. NYPSC at 4-5.
\136\ APPA Comments at 7, NRECA Comments at 8, NE Gas Industry
Comments at 9; MMWEC at 4.
---------------------------------------------------------------------------
102. Along the same lines, TVA and Ohio PUC believe that electric
transmission operators should be allowed to require any critical
information that may impact electric reliability.\137\
---------------------------------------------------------------------------
\137\ TVA Comments at 3; Ohio PUC Comments at 7.
---------------------------------------------------------------------------
103. In support of such a requirement, NYISO states that, while it
expects that its generators will react to fuel availability concerns by
derating their capacity when circumstances dictate, additional detailed
information, particularly during cold weather events, is
desirable.\138\ Similarly, ISO-NE states that although it often learns
about gas interruptions only after a generator is offline, it
understands that information regarding potential interruptions due to
insufficient gas supply is available much earlier.\139\
---------------------------------------------------------------------------
\138\ NYISO Comments at 4.
\139\ ISO-NE Comments at 8-9.
---------------------------------------------------------------------------
104. CAISO and EEI point out that some electric transmission
operators already have the ability to work with their stakeholders and/
or to file tariff changes that may be necessary to require generators
to provide this information.\140\ CAISO, EEI, EPSA, IRC, MISO, and
NEPGA also point out that some electric transmission operators already
require generators to share this type of information.\141\ EEI, for
example, states that PJM Interconnection L.L.C. (PJM) already requires
capacity resources to report fuel data to enable PJM to assist the
market in providing solutions in emergency situations.\142\ NEPGA
stated that, under the ISO-NE tariff, generators have an existing
obligation to report to ISO-NE when they are unable to operate due to
pipeline disruptions or otherwise.\143\ Similarly, MISO states that in
its markets, generator owners and/or operators are required to notify
MISO of anticipated fuel supply disruptions.\144\ CAISO states that its
tariff currently requires generators to inform it of any change or
potential change in the generators status, including any fuel supply
concerns of which the generator is aware.\145\ EPSA asserts that each
transmission operator already has rules regarding communication between
the transmission operator and generators which obligates generators to
provide the type of information discussed in the NOPR.\146\ IRC notes
that providing electric transmission operators with timely information
regarding a
[[Page 70180]]
generator's fuel status is consistent with existing reliability
standards.\147\ CAISO states that, if the Commission adopts a
regulation applicable to generators, it should apply that requirement
across all fuel types.\148\
---------------------------------------------------------------------------
\140\ EEI Comments at 5-6.
\141\ EEI Comments at 5-6, EPSA Comments at 4; NEPGA Comments at
4-5, MISO Comments at 4; CAISO Comments at 4.
\142\ EEI Comments at 5 (citing PJM Manual 13, Emergency
Operations, Section 6.4 Fuel Limitation Reporting. Effective date
June 1, 2013).
\143\ NEPGA Comments at 4.
\144\ MISO Comments at 4.
\145\ CAISO Comments at 4.
\146\ EPSA Comments at 5.
\147\ IRC Comments at n.7 (citing reliability standards EOP-001,
EOP-004, IRO-010, and TOP-002).
\148\ CAISO Comments at 4.
---------------------------------------------------------------------------
3. Commission Determination
105. Based upon the comments received, the Commission finds that it
is unnecessary in this proceeding to require a generator to notify its
electric transmission operator that its natural gas service may be
disrupted. However, to the extent they do not already exist, electric
transmission operators may file tariff provisions pursuant to FPA
section 205 to require generators to notify electric transmission
operators of information they require to maintain reliable service,
such as anticipated fuel supply disruptions. As noted by several
commenters, some electric transmission operator tariffs require
generators to notify electric transmission operators of anticipated
fuel supply disruptions. While some entities would prefer that the
Commission adopt generic regulations requiring the provision of this
type of information from a generator to an electric transmission
operator, those entities do not explain why current tariff requirements
are, or new tariff requirements would be, inadequate. Consistent with
the Final Rule, this approach would give electric transmission
operators significant flexibility to determine what information they
require from generators to promote reliable service on their systems.
B. Three-Way Communication of Non-Public Operational Information
1. NOPR
106. In the NOPR, the Commission sought comments on whether the
proposed rule should require transmission operators to include the
customer as part of a three-way communication to the extent the non-
public, operational information exchanged between transmission
operators involves customer-specific information (such as information
about individual generators) and if so, how such a requirement could be
implemented.\149\
---------------------------------------------------------------------------
\149\ NOPR, FERC Stats. & Regs. ] 32,699 at P 25 (cross-
referenced at 144 FERC ] 61,043).
---------------------------------------------------------------------------
2. Comments
107. Commenters were split on this issue, with slightly more
commenters opposed to requiring three-way communications when customer-
specific information is shared. AEP, APPA, Duke, EEI, EPSA, MMWEC,
NERC, NEGPA, and NRECA support requiring three-way communications,\150\
while CAISO, INGAA, ISO-NE, IRC, MISO, NE Gas Industry, NYISO, NYTO,
PG&E and Washington Gas oppose such a requirement.\151\
---------------------------------------------------------------------------
\150\ AEP Comments at 5-6; APPA Comments at 6-7; Duke Comments
at 4; EEI Comments at 6; EPSA Comments at 6-7; MMWEC Comments at 5;
NERC Comments at 8; NEGPA Comments at 5-6; NRECA Comments at 5-6.
\151\ CAISO Comments at 4-5; INGAA Comments at 5; ISO-NE
Comments at 9-10; IRC Comments at 5; MISO Comments at 4-5; NE
Natural Gas Industry Comments at 9; NYISO Comments at 4; NYTO
Comments at 8-9; PG&E Comments at 5-6, and Washington Gas Comments
at 9.
---------------------------------------------------------------------------
108. Many of the commenters that support such a requirement contend
that including the relevant customer or generator would prove more
efficient, as well as ensure the accuracy of the communications. NEPGA
contends that generator access to these communications is vital to
allow the generator to guarantee that the transmission operator does
not take dispatch actions based on incomplete information held by
either the interstate natural gas pipeline or electric transmission
operator.\152\ EEI, for example, notes that a public utility would not
know if a generator has back-up supply or other fuel arrangements
without contacting the generator.\153\ NRECA states that involving
individual customers could prove more efficient than excluding them
from the sharing of their information because individual customers and
generators can have information relevant to operations that
transmission operators do not have or do not have available as early in
time as the individual customers and generators.\154\ Duke and EPSA
believe that, in the event transmission operators cannot contact the
customer prior to sharing customer-specific information, the
transmission operators must inform the generator of what information
was shared so that the generator can respond to or correct any
misinformation.\155\ AEP argues that a stakeholder's non-public data
should only be shared with the explicit consent of that
stakeholder.\156\
---------------------------------------------------------------------------
\152\ NEPGA Comments at 5.
\153\ EEI Comments at 6.
\154\ NRECA Comments at 6.
\155\ Duke Comments at 4; EPSA Comments at 6-7.
\156\ AEP Comments at 5.
---------------------------------------------------------------------------
109. Many of the commenters that oppose such a requirement maintain
that requiring three-way communications would prove impracticable and
hamper reliability. The IRC and ISO-NE express concern that including
generators in the discussions with pipelines and electric transmission
operators would be inappropriate and difficult to implement for real-
time operations when decisions need to be made quickly.\157\ The IRC
and ISO-NE also state that gas and electric system contingencies
usually affect multiple generators receiving gas from one interstate
natural gas pipeline that are competitors with each other. They argue
that it may not be practical in real-time to schedule separate
discussions with each generator and to the extent discussions involved
multiple generators, it would be inappropriate to discuss confidential,
generator-specific information with other generators.\158\ INGAA and
the NE Gas Industry believe that such a requirement would serve to
limit conversations and have a chilling effect on communications the
Commission intends to foster through the proposed regulations.\159\
---------------------------------------------------------------------------
\157\ ISO-NE Comments at 9; IRC Comments at 5.
\158\ ISO-NE Comments at 9-10; IRC Comments at 5.
\159\ INGAA Comments at 5; NE Gas Industry Comments at 9.
---------------------------------------------------------------------------
110. Likewise, PG&E states that its gas transmission operators
already communicate daily with CAISO and incorporating every individual
customer into these calls would be logistically difficult and hamper
effective communications with CAISO.\160\ PG&E also asserts that such
communications may be unnecessary, as their gas transmission operators
already communicate daily with their generation customers and as a
result, those customers are frequently informed regarding relevant non-
public, operational information.
---------------------------------------------------------------------------
\160\ PG&E Comments at 5-6.
---------------------------------------------------------------------------
111. The NYTOs are also concerned that such three-way conversations
may unnecessarily result in the disclosure of market sensitive
information to generators or fuel managers.\161\ Similarly, Washington
Gas argues that the NOPR has not made a convincing case for giving one
class of shipper preferential access to non-public pipeline information
in a three-way meeting.\162\ Washington Gas argues that if a need
exists for three-party communications, the pipeline could arrange ``all
shipper'' meetings, which have been used for the release of critical
information since open access and are often supplemented by handouts
[[Page 70181]]
simultaneously posted on electronic bulletin boards (EBBs).
---------------------------------------------------------------------------
\161\ NYTOs Comments at 9.
\162\ Washington Gas Comments at 9.
---------------------------------------------------------------------------
112. Several commenters, including MISO, NYISO, NYTO, INGAA and NE
Gas Industry, oppose a mandatory three-way communication rule but
acknowledge the value of three-way communication in some situations and
thus, support a permissive approach to three-way communications.\163\
For instance, the NYISO states that it may be appropriate to have
three-way communications regarding the availability of gas transmission
capability, particularly if the generator's dispatch is critical to
reliability, but stresses that transmission operators need flexibility
in deciding whether to include generators in different
circumstances.\164\ The NYTOs believe that electric generators and
their fuel managers are the sole source of reliable information about
many fuel-related concerns and should be permitted to participate in
three-way communications involving those concerns, especially during
emergency conditions. However, the NYTOs state there is the potential
for misuse of non-public, operational information to the extent it is
shared as part of three-way communications since generators and their
fuel managers are merchant entities in New York. Thus, the NYTOs
maintain that the NOPR's proposed No-Conduit Rule should be extended to
the generator and fuel manager in those instances and the Commission
should clarify that the generator and fuel manager may not enter into
unrelated transactions based upon such information.\165\ NE Gas
Industry argues that generators should be included in broader industry
communications in the event of an emergency.\166\ MISO suggests that,
rather than require mandatory three-way communications, necessary
information could be shared through alternate means such as through a
designated representative or EBB.\167\ WGL suggests that rather than
engage in three-way communications, all shippers could be given the
opportunity to receive critical information simultaneously either by
phone, webcast or in person.\168\
---------------------------------------------------------------------------
\163\ NYISO Comments at 4; NE Gas Industry Comments at 9; NYTOs
at 9; and INGAA Comments at 5.
\164\ NYISO Comments at 4.
\165\ NYTO Comments at 8-9.
\166\ NE Gas Industry Comments at 9.
\167\ MISO Comments at 5.
\168\ WGL Comments at 9.
---------------------------------------------------------------------------
113. Regarding implementation of a requirement for three-way
communications, commenters suggest various approaches. EEI suggests
that public utilities and pipelines should discuss with stakeholders
the best way to enact such a requirement in the various regions.\169\
TVA suggests that NERC and NAESB standards could serve as
implementation mechanisms with allowances for regional differences
through organized market rules.\170\
---------------------------------------------------------------------------
\169\ EEI Comments at 6.
\170\ TVA Comments at 3.
---------------------------------------------------------------------------
114. AEP recommends the use of three-party confidentiality
agreements that include the electric generators, interstate natural gas
pipelines and electric transmission operators or, in lieu of a
confidentiality agreement, commercially sensitive data should be
handled in a manner in which the generator is the central point of
contact, i.e., only the generator would have ``all of the information
regarding commercially sensitive fuel supply options, gas
transportation contracts, power obligations, etc.'' \171\ NRECA
suggests that either electric transmission operators have in place a
non-disclosure agreement, through which customers could pre-approve
timely sharing of their non-public information provided they are made
aware of the disclosure within a reasonable period of time, or the
adoption of notice provisions by electric transmission operators and
pipelines, ``whereby disclosure will not be made until the customer is
provided with notice and opportunity to oppose the release (e.g., 5
days).'' \172\
---------------------------------------------------------------------------
\171\ AEP Comments at 6.
\172\ NRECA Comments at 5-6.
---------------------------------------------------------------------------
3. Commission Determination
115. The Commission will not require three-way communications when
customer-specific information is shared between electric transmission
owners and interstate natural gas pipelines. The Commission is
concerned that implementing such a requirement would prove
impracticable and could discourage interstate natural gas pipelines and
electric transmission operators from sharing valuable information.
Moreover, the inclusion of the No-Conduit Rule in this Final Rule
should ensure that any customer-specific information shared between
transmission operators is not disclosed to other market participants,
addressing many of the concerns of those commenters supporting a three-
way communication requirement.
116. The Commission is also concerned that three-way communications
conducted with one customer could result in the electric transmission
operator or interstate natural gas pipeline inadvertently sharing non-
public, operational information with only that customer. Selectively
sharing information with a limited class of shippers or market
participants without a rational justification could be characterized as
permitting a public utility or interstate natural gas pipeline to make
or grant an undue preference. Further, as noted in the NOPR,
transmission operators may always discuss customer-specific information
with the relevant customer and transmission operators but cannot
deviate from the terms of their tariffs and cannot operate in an unduly
discriminatory manner.
C. Examples of Non-Public Operational Information
1. NOPR
117. In the NOPR, the Commission stated that the term ``non-public,
operational information'' is information that is not publicly posted,
yet helps transmission operators to operate and maintain either a
reliable pipeline system or a reliable electric transmission
system.\173\ The Commission noted that non-public, operational
information may also include generator, pipeline, or transmission-
specific information. The Commission further stated that, in using the
term ``non-public, operational information,'' the Commission intended
that transmission operators would be permitted to share information
dealing with actual, anticipated, or potential effects on the ability
to provide electric and gas service based on the respective operator's
experience and understanding of the operational capability and customer
demands on their respective systems.
---------------------------------------------------------------------------
\173\ NOPR, FERC Stats. & Regs. ] 32,699 at P 23 (cross-
referenced at144 FERC ] 61,043).
---------------------------------------------------------------------------
118. The Commission provided examples of the types of information
that non-public, operational information could include, but emphasized
in the NOPR that the Commission was not proposing a specific list of
information that can be shared in order to provide flexibility to
individual operators. Examples of such information included, but were
not limited to, the following types of information:
Real-time and anticipated system conditions that have or
are anticipated to impact natural gas transportation by changing near
term gas flows;
Actual and anticipated electric service interruptions to
gas compressor locations;
Verification that there is sufficient pipeline operational
capability available at a specific delivery point to change the
quantity of natural gas delivered to the generator as identified by the
electric transmission operator;
[[Page 70182]]
Actual and projected gas transportation restrictions to
electric generators;
Real-time actual flow and operational capacity data at all
receipt and delivery points; real-time pipeline pressure at all receipt
and delivery points;
Nominated and scheduled quantities of shippers who are or
who supply gas-fired generators; and,
scheduled dates and duration of generator, pipeline, and
transmission maintenance and planned outages.
The Commission sought comment on the specific categories of
information identified.
2. Comments
119. EEI, NERC, NYISO, CAISO, APPA and IRC support the examples of
non-public, operational information provided in the NOPR.\174\ IRC
states that, as a general matter, the more information that interstate
natural gas pipelines can provide the electric transmission operator
regarding pipeline system conditions, the better position the electric
transmission operator will be in to use that information to address
system contingencies.\175\ EEI states that the NOPR's general
definition and examples of non-public, operational information provide
sufficient guidance to public utilities and interstate natural gas
pipelines as to the types of information that the Commission
contemplates could be conveyed under the proposal.\176\
---------------------------------------------------------------------------
\174\ EEI Comments at 4-5; NERC Comments at 7; NYISO Comments at
3; CAISO Comments at 3; APPA Comments at 5; and IRC Comments at 3.
\175\ IRC Comments at 3.
\176\ EEI Comments at 4-5.
---------------------------------------------------------------------------
120. Some commenters provide comments specific to the examples
included in the NOPR and describe in detail the importance of
particular categories of information for promoting reliable service or
operational planning.\177\ Other commenters express concern with some
of the examples of non-public, operational information provided in the
NOPR.\178\ Some commenters also recommend that other types of
information be shared in addition to the examples listed in the
NOPR.\179\
---------------------------------------------------------------------------
\177\ See e.g., ISO-NE Comments at 5-8; ITC Comments at 4; NERC
Comments at 7; NYISO Comments at 3; ISO-NE Comments at 4-8;
Washington Gas Comments at; and NGSA Comments at 6-7.
\178\ See, e.g., NE Gas Industry Comments at 8; NGSA Comments at
7.
\179\ ITC Comments at 4; NYISO Comments at 3-4; NYPSC Comments
at 6.
---------------------------------------------------------------------------
121. A few commenters request clarification regarding the list of
examples in the NOPR, or propose modifications to the list of examples
in the NOPR.\180\ The NYTOs, for example, request that the Commission
clarify that RTOs and ISOs are permitted to share unit-specific,
generator dispatch schedules with interstate natural gas pipelines (and
LDCs) for the purpose of promoting reliable service or operational
planning, subject to the No-Conduit Rule.\181\ In addition, INGAA seeks
further clarification regarding what non-public, operational
information regarding future ``operational planning'' transmission
operators may share under the proposed rule.\182\
---------------------------------------------------------------------------
\180\ NERC Comments at 7; NYPSC Comments at 4.
\181\ NYTOs Comments at 7-8.
\182\ INGAA Comments at 4.
---------------------------------------------------------------------------
122. Finally, PGC and Washington Gas state that many of the
examples of information proposed to be shared between pipelines and
transmission operators could be made public and shared with all market
participants.\183\
---------------------------------------------------------------------------
\183\ PGC Comments at 3 and 4; Washington Gas Comments at 2-4.
---------------------------------------------------------------------------
3. Commission Determination
123. The Commission finds that the term ``non-public, operational
information'' is sufficiently clear to describe the information that
may be shared under this Final Rule. The examples provide guidance to
public utilities and interstate natural gas pipelines as to the types
of information that may be communicated under the rule. In general, we
respond to comments regarding the specific list of examples provided in
the NOPR with the guidance that we expect transmission operators to
exchange that information which they find relevant to promote reliable
service or operational planning on their systems. As explained in the
NOPR, and reaffirmed here, the Commission is providing flexibility to
transmission operators--who have the most insight and knowledge of
their systems--to determine what non-public, operational information,
if any, they deem valuable to maintain the reliability and integrity of
their systems.
124. Regarding concerns of onerous requests by one transmission
operator to another, we reiterate that the communications permitted
under the Final Rule are voluntary and to the extent a transmission
operator chooses not to share the requested non-public, operational
information, the transmission operator is free to do so. For example,
the Commission does not anticipate that an interstate natural gas
pipeline will automatically share with an electric transmission
operator all of the pipeline's non-public operational information in
its possession. Rather, the interstate natural gas pipeline will share
non-public operational information as necessary to promote reliable
service and operational planning.
125. In response to PGC and Washington Gas, the Commission
disagrees that the non-public, operational information transmission
operators are permitted to share with one another should generally be
made public. The Commission is providing explicit authority to
transmission operators to exchange confidential and potentially
commercially sensitive information, including generator-specific
information, with one another for the purpose of promoting reliable
service or operational planning. As discussed in more detail infra, the
Commission is adopting a No-Conduit Rule due to concerns regarding the
improper use of such information if disclosed to a third party or to a
transmission operator's marketing function employees.
IV. Clarification Regarding Table-Top Exercises
A. NOPR
126. In the NOPR, the Commission provided clarification of the
applicability of the Standards of Conduct and statutory prohibition
against undue discrimination to exchanges of information with regard to
table-top exercises involving market affiliates of transmission
providers and inter-industry participants.\184\ The Commission
clarified that, under the Standards of Conduct, marketing function
employees may participate in table-top exercises that include a wide
range of industry participants who will have equal access to non-public
transmission information. However, the Commission re-emphasized that
non-public transmission information cannot be provided during private
table-top exercises involving only the transmission provider and
marketing function employees since they would receive preferential
access to non-public transmission information or preferential access to
transmission facilities.
---------------------------------------------------------------------------
\184\ NOPR, FERC Stats. & Regs. ] 32,699 at PP 20-21 (cross-
referenced at 144 FERC ] 61,043).
---------------------------------------------------------------------------
B. Comments
127. EEI and NGSA request that the Commission clarify the meaning
of a ``tabletop exercise.'' \185\ EEI also requests that the Commission
clarify that marketing function employees can continue to participate
in these
[[Page 70183]]
exercises without violating the No-Conduit Rule in the NOPR.\186\ NGSA
also requests that the Commission clarify that commercially sensitive
information should not be disclosed at these events without consent of
the relevant companies.\187\
---------------------------------------------------------------------------
\185\ EEI Comments at 7; NGSA Comments at 11.
\186\ EEI Comments at 7.
\187\ NGSA Comments at 11.
---------------------------------------------------------------------------
C. Commission Determination
128. As used in the NOPR, the term ``table-top exercise'' refers to
an exercise used to assess inter- or intra-industry coordination and
communications, usually during an emergency situation. For example, the
NYTOs stated in earlier comments that the electric and gas industries
in New York regularly participate in separate ``tabletop'' reliability
drills. They stated that the NYISO and NYTOs conduct drills prior to
each summer season to simulate the restoration of service after a gas
supply-related outage and the Northeast Gas Association holds annual
emergency communications exercises among gas utilities and interstate
pipelines serving the northeast that simulate conditions following
major system emergencies.\188\
---------------------------------------------------------------------------
\188\ NYTOs Comments, Docket No. AD12-12-000, at 5 (filed Jan.
7, 2013).
---------------------------------------------------------------------------
129. As requested by EEI, we clarify that under the Standards of
Conduct and under the Final Rule, marketing function employees may
participate in table-top exercises that include a wide range of
industry participants who will have equal access to non-public
transmission or operational information. However, non-public
transmission or operational information cannot be provided during
private table-top exercises involving only the transmission provider or
operator and marketing function employees since they would receive
preferential access to non-public transmission or operational
information or preferential access to transmission facilities.
130. The Commission also clarifies that, under the Standards of
Conduct and the Final Rule, the disclosure of commercially sensitive,
customer-specific information at these events is not permitted without
the consent of the relevant entities.
V. Miscellaneous
A. Monitoring, Existing Tariff Requirements, Document Destruction
1. Comments
131. AEP requests that the Commission designate an entity to ensure
that reliability and market protections are in place because of the
potential for disagreement between the two industries with regard to
confidential information sharing.\189\
---------------------------------------------------------------------------
\189\ AEP Comments at 7.
---------------------------------------------------------------------------
132. NRECA states that the Commission should maintain in the Final
Rule the explicit requirement that ``to the extent that an electric
transmission operator or interstate natural gas pipeline has a tariff
provision which precludes a communication that would otherwise be
authorized under the proposed regulations, it [must] make a filing
under the FPA or NGA to revise that provision to permit such exchanges
of information.'' \190\ However, NRECA states that the Commission
should clarify that to the extent market participants' confidential
information is required by tariff to be protected from public
disclosure, the Final Rule in this proceeding cannot be deemed to
supersede those tariff provisions.\191\ NRECA states that in addition
to protecting against disclosure of confidential information which is
subject to existing tariff provisions, the Final Rule should also
provide assurance that existing notice provisions regarding disclosure
of confidential information will be followed for sharing of non-pubic
operational information.\192\ NRECA states that the Final Rule should
adopt the Commission's proposal to clarify that existing tariffs must
be complied with absent a Commission-approved revision.
---------------------------------------------------------------------------
\190\ NRECA Comments at 5 (citing NOPR, FERC Stats. & Regs. ]
32,699 at P 10 (cross-referenced at 144 FERC ] 61,043).
\191\ NRECA provides as an example PJM's Amended and Restated
Operating Agreement which prohibits disclosure of confidential
information except in defined circumstances, including to NERC and
applicable regional entities for reliability.
\192\ NRECA states that PJM's Operating Agreement requires
notice to the affected Member before PJM can make any disclosure of
confidential information if required by law.
---------------------------------------------------------------------------
133. NEPGA asserts that the Commission should establish rules for
the destruction or return of written or recorded information within six
months to protect generators' commercial interests.\193\ NEPGA contends
that this requirement is an important protection against the
potentially harmful effects of the distribution of generator-specific,
commercially sensitive information.
---------------------------------------------------------------------------
\193\ NEPGA Comments at 3-4.
---------------------------------------------------------------------------
2. Commission Determination
134. In response to AEP, the Commission reaffirms that the
communications permitted under the Final Rule are voluntary and that to
the extent a transmission operator chooses not to share the requested
non-public, operational information, the transmission operator is free
to do so. To the extent this voluntary approach proves inadequate to
promote reliable service or operational planning, the Commission may
revisit the need to require certain communications or information
sharing between transmission operators in the future. However, the
Commission finds that providing explicit authority to transmission
operators--who have the most insight and knowledge of their systems--to
share non-public, operational information with each other will promote
reliable service or operational planning on both the public utility's
and pipeline's system. Furthermore, the Commission declines to adopt
AEP's proposal to designate an entity to supervise interstate natural
gas pipeline-electric transmission operator communications. We see no
need for such supervision of this voluntary information sharing program
at this time. With regard to requests for added market protections, as
discussed above, we conclude that the No-Conduit Rule, together with
the requirements that natural gas pipelines and electric transmission
operators abide by their tariffs, provides a reasonable balance between
the exchange of important information and protection against the
disclosure of non-public operational information, including
confidential information.
135. In response to NRECA's comments regarding the relationship of
this Final Rule to existing tariff provisions, we note that this Final
Rule does not supersede any existing tariff provisions.\194\ Thus, to
the extent an electric transmission operator or interstate natural gas
pipeline has an existing tariff provision that precludes a
communication that would otherwise be authorized under the regulations
adopted here, before it may share such precluded information under the
express authorization provided in this Final Rule, it must make a
filing under the FPA or NGA to revise that provision to permit such
exchanges of information. In short, if a transmission operator wants to
take advantage of the explicit authority provided by the Commission
under the Final Rule, and that transmission operator has tariff
provisions prohibiting the communications permitted under this rule, it
must make a filing with the Commission to revise the relevant tariff
provisions to permit such exchanges of information. Similarly, we
clarify that any existing tariff provisions requiring
[[Page 70184]]
notice regarding the disclosure of confidential information, including
the non-public, operational information at issue here, remain in place
unless proposed revisions to those tariffs are approved by the
Commission.
---------------------------------------------------------------------------
\194\ Regulation of Short-Term Natural Gas Transportation
Services, and Regulation of Interstate Natural Gas Transportation
Services, 101 FERC ] 61,127, at P 36 (2002).
---------------------------------------------------------------------------
136. In response to NEPGA, the Commission declines to generically
establish rules for the destruction or return of written or recorded
information within six months to protect generator's commercial
interests. As discussed previously, the Commission is adopting a No-
Conduit Rule which, together with the requirements that natural gas
pipelines and electric transmission operators abide by their tariffs,
should adequately protect against the harmful disclosure or
distribution of non-public operational information, including
generator-specific, commercially sensitive information.
B. Costs of Information Sharing
1. Comments
137. ELCON suggests that Commission require natural gas pipelines
and electric transmission operators to account for the costs of
information sharing.\195\ ELCON requests that the Commission direct
natural gas pipelines and electric transmission operators to not incur
costs that are not commensurate with an identified benefit. ELCON
suggests that the NOPR's flexibility and non-binding examples of
information sharing raise the specter that the Commission contemplates
implementation of extensive information sharing systems whose costs
outweigh the benefits to system reliability and contingency planning.
ELCON requests that the Commission explicitly state that it is not
intending to encourage the development and implementation of
information sharing systems whose costs are not commensurate with their
benefits.\196\
---------------------------------------------------------------------------
\195\ ELCON Comments at 2-3.
\196\ Id.
---------------------------------------------------------------------------
2. Commission Determination
138. The Commission finds that ELCON's request for transmission
operators to account for the costs of information sharing are premature
and outside the scope of this Final Rule. In this Final Rule, the
Commission is providing explicit authority for transmission operators
to share non-public, operational information with each other for the
purpose of promoting reliable service or operational planning. In
addition, the Commission reiterates that in adopting the proposed
regulations, the Commission is providing flexibility to individual
transmission operators--who have the most insight and knowledge of
their systems--to share that information which they deem necessary to
promote reliable service and operational planning on their system.
Issues related to the costs of systems or procedures developed to allow
for the information sharing permitted by this Final Rule may be
appropriately raised in other proceedings, including transmission
operators' rate cases.
C. Implementation
1. Comments
139. NGSA suggests that the Commission implement its proposed rule
on an interim basis and reassess the impacts of allowing the proposed
communication between utilities after some experience under the new
communications regime. NGSA states that this approach would be similar
to past rulemaking proceedings such as the natural gas capacity release
rulemaking.\197\ NGSA proposes that after an interim period of one
year, transmission operators should report to the Commission what
information was shared and how this information sharing promoted
reliable service or operational planning.\198\ NGSA suggests that the
information would need to be provided in a manner that protects
confidential or proprietary data. After the interim period,
transmission operators would also report what actions were taken based
on information exchanges to allow the Commission to more accurately
assess the benefits of increased communications. NGSA also suggests
that the Commission release a report summarizing the impacts of this
information sharing rule and hold a technical conference for industry
to assess the impacts of the rule. NGSA states that at the technical
conference, the Commission and industry should assess whether: (1) The
scope of allowed communications should be narrowe; (2) additional
protections are needed to ensure commercially sensitive information is
not released; and (3) transmission operators should be required to
publicly post shared information that is not commercially
sensitive.\199\
---------------------------------------------------------------------------
\197\ NGSA Comments at 9-10 (citing Regulation of Short-Term
Natural Gas Transportation Services and Regulation of Interstate
Natural Gas Transportation Services, Order No. 637, FERC Stats. &
Regs. ] 31,091 (2000) (cross-referenced at 90 FERC ] 61,109
(2000))).
\198\ Id. at 10.
\199\ Id. at 10-11.
---------------------------------------------------------------------------
140. NGSA suggests that the assessment and technical conference
would allow the Commission to determine whether further improvements to
the communications rules are needed. After receiving reports from
transmission operators and pipelines, the Commission could consider
whether some publicly available and not commercially sensitive
communications should be publicly posted, for example, on a pipeline
EBB. NGSA contends that the Commission could also determine whether
market participants' information is sufficiently protected under the
proposed rule. NGSA suggests that requiring pipelines and transmission
operators to report what information they communicated during an
interim test period will allow the Commission and industry to determine
what additional protections might be needed. NGSA suggests that market
participants would have greater confidence in expanded communications
knowing that there would be an opportunity to learn what information
was shared and that the Commission would make changes to the rule if
needed.\200\
---------------------------------------------------------------------------
\200\ NGSA Comments at 11.
---------------------------------------------------------------------------
[[Page 70185]]
141. NRECA suggests that the Commission require ``status report''
filings by transmission operators to explain progress made in the
sharing of non-public, operational information.\201\ NRECA states that
the reports could be part of a comprehensive submission to be submitted
at regular intervals (e.g., quarterly or semi-annually), similar to the
reports required by RTOs and ISOs on gas-electric coordination issues,
or could focus only on implementation of the Final Rule in this
proceeding. Either way, NRECA suggests that the Final Rule include a
mechanism for the Commission to gauge response and outcome of the Final
Rule, and its impact on gas-electric coordination efforts.\202\
---------------------------------------------------------------------------
\201\ NRECA Comments at 5.
\202\ Id.
---------------------------------------------------------------------------
142. APPA suggests that, after a period of time, the Commission
could revisit its revised regulations in this area to determine whether
it needs to further define the term ``non-public, operational
information'' and to evaluate how the voluntary approach is
working.\203\ PUCO also states that it would be appropriate for the
Commission to periodically review which non-public information is
shared and whether that exchange of information is adequate to maintain
reliability.\204\ PUCO further states that because different regions
will have diverse practices concerning the level and type of non-public
information shared, the Commission should use the collection of such
data to arrive at a proposed best practices solution that is most
effective to ensure efficient operations and to promote reliability.
NESCOE also encourages the Commission to undertake periodic assessments
of the efficacy of the changes made in the Final Rule, the extent to
which impediments to communications and information sharing remain, and
consider additional actions if needed. \205\
---------------------------------------------------------------------------
\203\ APPA Comment at 5.
\204\ PUCO Comments at 6.
\205\ NESCOE Comments at 6.
---------------------------------------------------------------------------
2. Commission Determination
143. The Commission will not adopt NGSA's suggestion of
implementing the proposed rule on an interim basis. The Commission is
concerned that existing barriers--real or perceived--to the sharing of
non-public, operational information could impede transmission
operators' ability to reliably manage the operation of interstate
natural gas pipeline and electric transmission systems. Therefore, the
Commission is taking action to ensure that transmission operators
covered by this rule may communicate non-public, operational
information, subject to the No-Conduit Rule.
144. The Commission declines to adopt the suggestion of NRECA,
APPA, PUCO and NESCO that transmission operators submit status report
filings describing progress made in the sharing of non-public,
operational information. We fully expect market participants in both
industries, as they experience the communications contemplated by this
Final Rule, to keep the Commission informed about progress, issues and
areas of possible improvement. We see no reason to impose a requirement
for status reports at this time.
VI. Information Collection Statement
145. The collection of information contained in this Final Rule is
being submitted to the Office of Management and Budget (OMB) for review
under Section 3507(d) of the Paperwork Reduction Act of 1995
(PRA).\206\ OMB's regulations require approval of certain information
collection requirements imposed by agency rule.\207\ Upon approval of a
collection of information, OMB will assign an OMB control number and an
expiration date. Respondents subject to the filing requirements of a
rule will not be penalized for failing to respond to this collection of
information if the collection of information does not display a valid
OMB control number.
---------------------------------------------------------------------------
\206\ 44 U.S.C. 3507(d) (2012).
\207\ 5 CFR 1320.
---------------------------------------------------------------------------
146. Public Reporting Burden: The communications and information
sharing (described in new 18 CFR 38.2 and 18 CFR 284.12(b)(4)) are
voluntary, take place between various industry entities (and are not
submitted to the Commission), and are intended to promote reliable
service or operational planning. In the NOPR, the Commission solicited
comments on the need for this information and the frequency of
providing it (number of responses per respondent). No filed comments
addressed the proposed Information Collection Statement, including the
estimated public reporting burden, or the proposed Regulatory
Flexibility Act Certification, including the estimated impact on small
entities. Commenters acknowledged that reliability and operational
planning on interstate natural gas pipelines and electric transmission
systems could be further enhanced by information sharing. While the
extent of such communications likely will vary significantly across the
country, the annual estimates represent an expected average and reflect
the burden for operational planning and emergencies.
147. In the Final Rule, the Commission explains that to the extent
an electric transmission operator or interstate natural gas pipeline
has a tariff provision which precludes a communication that would
otherwise be authorized under the proposed regulations, it must make a
filing under section 205 of the FPA or section 4 of the NGA to revise
that provision to permit such exchanges of information.
148. The reporting requirements in the Final Rule include: the
voluntary communication of non-public, operational information among
interstate natural gas pipelines and electric transmission operators,
and possibly necessary tariff filings by electric transmission
operators and natural gas pipelines. The additional estimated annual
burden and cost follow.
[[Page 70186]]
FERC-923, Communication of Operational Information Between Natural Gas Pipelines and Electric Transmission Operators, Final Rule in Docket No. RM13-17
\208\
--------------------------------------------------------------------------------------------------------------------------------------------------------
Number of Number of Average burden Total annual Total annual
Type of entity (1) respondents responses per hours per burden hours cost ($) (5)*($/
(2) respondent (3) response (4) (2)*(3)*(4)=(5) hr)=(6) \209\
--------------------------------------------------------------------------------------------------------------------------------------------------------
Public Utility Transmission Operator, communications............... \210\ 167 \211\ 12 0.50 1002 $60,531
Interstate Natural Gas Pipelines, communications................... \212\ 137 12 0.50 822 49,657
Public Utility Transmission Operator (tariff change)............... \213\ 4 2 \214\ 8 64 2,832
Interstate Natural Gas Pipelines (tariff change)................... \215\ 4 1 \216\ 8 32 1,416
------------------------------------------------------------------------------------
Total.......................................................... ............... ............... ............... 1,920 114,436
--------------------------------------------------------------------------------------------------------------------------------------------------------
Title: FERC-923, ``Communication of Operational Information between
Natural Gas Pipelines, and Electric Transmission Operators.''
---------------------------------------------------------------------------
\208\ Columns 5 and 6 are rounded.
\209\ For communications, the estimated hourly cost (for salary
plus benefits) is $60.41; estimated annual costs are $125,647 (based
on 2,080 hours per year). It is based on data from the Bureau of
Labor Statistics Occupational Outlook Handbook, 2012-2013 edition
for the top 10% of ``Power Plant Operators, Distributors, and
Dispatchers'' (at http://www.bls.gov/ooh/).
For tariff filings, the average hourly cost (for salary plus
benefits) is $44.25. This hourly estimate will be used for public
utility transmission operators and interstate natural gas pipelines.
It is based on data provided by the Bureau of Labor Statistics
Occupational Outlook Handbook, 2012--2013 edition for the median for
``Lawyers,'' ``Paralegal and Legal Assistants,'' and ``Secretaries
and Administrative Support'' (at http://www.bls.gov/ooh/). The
estimated annual costs (salary plus benefits) for Lawyers, Paralegal
and Legal Assistance, and Secretaries and Administrative Support are
$160,398, $66,401, and $49,303, respectively. The hourly cost (based
on 2080 hours per year) is $77.11, $31.92 and $23.70 for the three
occupations, respectively.
For the estimate of the benefits component, see http://www.bls.gov/news.release/ecec.nr0.htm.
\210\ The estimate for the number of respondents is based on the
North American Electric Reliability Corporation (NERC) Compliance
Registry as of April 30, 2013, minus the Transmission Operators
within ERCOT. Using the Small Business Administration (SBA)
definition, 31 of the 167 Public Utility Transmission Operators are
considered ``small.''
\211\ The Commission estimates an annual average per entity of
12 responses (including electric and gas emergency and/or
operational contacts).
\212\ The 2012 filings of the FERC Forms 2 and 2A indicated that
there are 137 interstate natural gas pipelines. Of those pipelines,
eight (8) are considered small using the definition of the Small
Business Administration (at 13 CFR 121.301), including the
affiliates.
\213\ Of the 167 Public Utility Transmission Operators, the
Commission estimates that four will make tariff filings.
\214\ The Commission estimates that the public utility
transmission operator will require eight work hours to file the
amendment to the tariff from a team that consists of a ``Lawyer,'' a
``Paralegal and Legal Assistant,'' and a ``Secretary and
Administrative Support.''
\215\ Of the 137 interstate natural gas pipelines, the
Commission estimates that four will make tariff filings.
\216\ The Commission estimates that an interstate natural gas
pipeline will require eight work hours to file the amendment to the
tariff from a team that consists of a ``Lawyer,'' a ``Paralegal and
Legal Assistant,'' and a ``Secretary and Administrative Support.''
---------------------------------------------------------------------------
Action: Proposed FERC-923.
OMB Control Nos.: 1902-0265 (FERC-923).
Respondents: Public utility transmission operators and interstate
natural gas pipelines.
Frequency of Responses: FERC-923, as needed.
Necessity of the Information: In this Final Rule, the Commission is
revising Parts 38 and 284 of the Commission's regulations to authorize
interstate natural gas pipelines and public utilities that own,
operate, or control facilities used for the transmission of electric
energy in interstate commerce to share non-public, operational
information for the purpose of promoting reliable service and
operational planning on either the public utility's or pipeline's
system. Such sharing is voluntary.
149. The revised regulations will help promote the reliability of
pipeline and public utility transmission service by permitting
transmission operators to share information that they deem necessary to
promote the reliability and integrity of their systems with each other.
150. Internal Review: The Commission has reviewed the requirements
and determined that the proposed amendments are necessary. These
requirements conform to the Commission's need for efficient information
collection, communication, and management within the energy industry.
The Commission has assured itself, by means of internal review, that
there is specific, objective support for the burden estimates
associated with the information collection requirements. Interested
persons may obtain information on the reporting requirements by
contacting the following: Federal Energy Regulatory Commission, 888
First Street NE., Washington, DC 20426 [Attention: Ellen Brown, Office
of the Executive Director, email: [email protected], phone: (202)
502-8663, fax: (202) 273-0873].
151. Please send comments concerning the collection of information
and the associated burden estimates to the Commission, and to the
Office of Management and Budget, Office of Information and Regulatory
Affairs, Washington, DC 20503 [Attention: Desk Officer for the Federal
Energy Regulatory Commission, phone: (202) 395-4638, fax: (202) 395-
7285]. For security reasons, comments to OMB should be submitted by
email to: [email protected]. Comments submitted to OMB
should include Docket Number RM13-17-000, FERC-923 (OMB Control No.
1902-0268).
VII. Environmental Analysis
152. The Commission is required to prepare an Environmental
Assessment or an Environmental Impact Statement for any action that may
have a significant adverse effect on the human environment.\217\ The
Commission concludes that neither an Environmental Assessment nor an
Environmental Impact Statement is required for this Final Rule under
section 380.4(a)(2)(ii) of the Commission's regulations, which provides
a categorical exemption for proposals for legislation and promulgation
of rules that are clarifying, corrective, or procedural, or that do not
substantively change the effect of legislation or regulations being
amended.\218\
---------------------------------------------------------------------------
\217\ Regulations Implementing the National Environmental Policy
Act of 1969, Order No. 486, 52 FR 47897 (Dec. 17, 1987), FERC Stats.
& Regs., Regulations Preambles 1986-1990 ] 30,783 (1987).
\218\ 18 CFR 380.4(a)(2)(ii) (2013).
---------------------------------------------------------------------------
VIII. Regulatory Flexibility Act
153. The Regulatory Flexibility Act of 1980 (RFA) \219\ generally
requires a description and analysis of rules that will have significant
economic impact on a substantial number of small entities. The RFA
mandates
[[Page 70187]]
consideration of regulatory alternatives that accomplish the stated
objectives of a rule and that minimize any significant economic impact
on a substantial number of small entities. The Small Business
Administration's (SBA's) Office of Size Standards develops the
numerical definition of a small business.\220\ The SBA has established
a size standard, for electric utilities, electric power distribution,
and electric bulk power transmission and control, stating that a firm
is small if, including its affiliates, it is primarily engaged in the
transmission, generation and/or distribution of electric energy for
sale and its total electric output for the preceding fiscal year did
not exceed four million megawatt hours.\221\ For pipeline
transportation of natural gas, the SBA defines a small entity as having
a maximum annual receipt of $25.5 million dollars.\222\ For a ``Natural
Gas Distribution'' company, the SBA defines a small entity as having
less than 500 employees.\223\
---------------------------------------------------------------------------
\219\ 5 U.S.C. 601-612 (2012).
\220\ 13 CFR 121.101 (2012).
\221\ 13 CFR 121.201, Sector 22, Subsector 221, Utilities & n.1.
\222\ Based on 13 CFR 121.201, Sectors 48-49, Subsector 486,
Pipeline Transportation, the annual receipts indicate the maximum
allowed for a concern and its affiliates to be considered ``small.''
\223\ 13 CFR 121.201, Sector 22, Subsector 221, Utilities, NAICS
code 221210.
---------------------------------------------------------------------------
154. The Commission estimates a total of 39 ``small'' entities
\224\ (or 12.8 percent of the total of 304 entities), and an average
annual cost for each entity of $376.\225\ This proposal will enable
entities of all sizes to communicate voluntarily and to share non-
public, operational information for the purpose of promoting reliable
service or operational planning, thereby easing and improving the
normal business process. Accordingly, the Commission certifies that
this rule will not have a significant impact on a substantial number of
small entities and no regulatory flexibility analysis is required.
---------------------------------------------------------------------------
\224\ Based on the SBA definitions and including affiliates, the
number of ``small'' entities is estimated to be: (1) for public
utility transmission operators, 31 small public utilities; and (2)
for interstate natural gas pipelines, eight small interstate natural
gas pipelines.
\225\ The information sharing and communications permitted in
this Final Rule are voluntary. For small entities which do not serve
or take service from natural gas-fired electric generators, no such
communications are necessary or required and their burden will
effectively be zero. For small entities which do not wish to
participate in communications among transmission operators serving
or being served by natural gas-fired electric generators, their
burden is also zero.
---------------------------------------------------------------------------
IX. Document Availability
155. In addition to publishing the full text of this document in
the Federal Register, the Commission provides all interested persons an
opportunity to view and/or print the contents of this document via the
Internet through FERC's Home Page (http://www.ferc.gov) and in FERC's
Public Reference Room during normal business hours (8:30 a.m. to 5:00
p.m. Eastern time) at 888 First Street NE., Room 2A, Washington, DC
20426.
156. From FERC's Home Page on the Internet, this information is
available on eLibrary. The full text of this document is available on
eLibrary in PDF and Microsoft Word format for viewing, printing, and/or
downloading. To access this document in eLibrary, type the docket
number excluding the last three digits of this document in the docket
number field.
157. User assistance is available for eLibrary and the FERC's Web
site during normal business hours from FERC Online Support at 202-502-
6652 (toll free at 1-866-208-3676) or email at
[email protected], or the Public Reference Room at (202) 502-
8371, TTY (202) 502-8659. Email the Public Reference Room at
[email protected].
X. Effective Date and Congressional Notification
158. These regulations are effective December 23, 2013. The
incorporation by reference of certain publications in this rule is
approved by the Director of the Federal Register as of December 23,
2013. The Commission has determined, with the concurrence of the
Administrator of the Office of Information and Regulatory Affairs of
OMB, that this rule is not a ``major rule'' as defined in section 351
of the Small Business Regulatory Enforcement Fairness Act of 1996.
List of Subjects
18 CFR Part 38
Conflict of interests, Electric power plants, Electric utilities,
Incorporation by reference, Reporting and recordkeeping requirements.
18 CFR Part 284
Natural gas, Reporting and recordkeeping requirements.
By the Commission.
Nathaniel J. Davis, Sr.,
Deputy Secretary.
In consideration of the foregoing, the Commission amends Part 38
and Part 284, Chapter I, Title 18, Code of Federal Regulations, as
follows:
PART 38--STANDARDS FOR PUBLIC UTILITY BUSINESS OPERATIONS AND
COMMUNICATIONS
0
1. The authority citation for Part 38 continues to read as follows:
Authority: 16 U.S.C. 791-825r, 2601-2645; 31 U.S.C. 9701; 42
U.S.C. 7101-7352.
0
2. The heading of Part 38 is revised to read as set forth above:
Sec. 38.1 [Removed]
0
3. Remove Sec. 38.1.
Sec. 38.2 [Redesignated as Sec. 38.1]
0
4. Redesignate Sec. 38.2 as Sec. 38.1
0
5. In newly redesignated Sec. 38.1, paragraph (a) is revised to read
as follows:
Sec. 38.1 Incorporation by reference of North American Energy
Standards Board Wholesale Electric Quadrant standards.
(a) Any public utility that owns, operates, or controls facilities
used for the transmission of electric energy in interstate commerce or
for the sale of electric energy at wholesale in interstate commerce and
any non-public utility that seeks voluntary compliance with
jurisdictional transmission tariff reciprocity conditions must comply
with the following business practice and electronic communication
standards promulgated by the North American Energy Standards Board
Wholesale Electric Quadrant, which are incorporated herein by
reference:
* * * * *
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6. New Sec. 38.2 is added to read as follows:
Sec. 38.2 Communication and information sharing among public
utilities and pipelines.
(a) Any public utility that owns, operates, or controls facilities
used for the transmission of electric energy in interstate commerce is
authorized to share non-public, operational information with a
pipeline, as defined in Sec. 284.12(b)(4) of this chapter, or another
public utility covered by this section for the purpose of promoting
reliable service or operational planning.
(b) Except as permitted in paragraph (a) of this section, a public
utility, as defined in this section, and its employees, contractors,
consultants, and agents are prohibited from disclosing, or using anyone
as a conduit for the disclosure of, non-public, operational information
received from a pipeline pursuant to Sec. 284.12(b)(4) of this chapter
to a third party or to its marketing function employees as that term is
defined in Sec. 358.3(d) of this chapter.
[[Page 70188]]
PART 284--CERTAIN SALES AND TRANSPORTATION OF NATURAL GAS UNDER THE
NATURAL GAS POLICY ACT OF 1978 AND RELATED AUTHORITIES
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7. The authority citation for Part 284 continues to read as follows:
Authority: 15 U.S.C. 717-717z, 3301-3432; 42 U.S.C. 7101-7352;
43 U.S.C. 1331-1356.
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8. In Sec. 284.12, paragraph (b)(4) is added to read as follows:
Sec. 284.12 Standards for pipeline business operations and
communications.
* * * * *
(b) * * *
(4) Communication and information sharing among pipelines and
public utilities. (i) A pipeline is authorized to share non-public,
operational information with a public utility, as defined in Sec.
38.2(a) of this chapter or another pipeline covered by this section,
for the purpose of promoting reliable service or operational planning.
(ii) Except as permitted in paragraph (b)(4)(i) of this section, a
pipeline and its employees, contractors, consultants, and agents are
prohibited from disclosing, or using anyone as a conduit for the
disclosure of, non-public, operational information received from a
public utility pursuant to Sec. 38.2 of this chapter to a third party
or to its marketing function employees as that term is defined in Sec.
358.3(d) of this chapter.
[FR Doc. 2013-28078 Filed 11-21-13; 8:45 am]
BILLING CODE 6717-01-P